Americans hoping for relief from high borrowing costs got none on June 17, when the Federal Reserve left its benchmark rate unchanged at Kevin Warsh’s first meeting as chair. The federal funds rate remains at a range of 3.5% to 3.75%, keeping credit cards and personal loans expensive while the central bank promises "price stability" from above. For people already paying the bill, the message was simple: not much changes for borrowers, and the apparatus stays in control.
Who Pays for “Stability”
The Fed’s decision means Americans will continue to pay similar rates on credit cards and personal loans. Elevated interest rates will also continue to benefit savers through higher returns on certificates of deposit and high-yield savings accounts. The 30-year fixed-rate for mortgages, meanwhile, tracks the trajectory of the 10-year U.S. Treasury note instead. In other words, the people trying to borrow to live, buy, or keep up keep getting squeezed, while those with money already parked in savings get the upside.
Warsh said the Fed cannot have "a very significant effect on particular prices," including gas and groceries, but said it still has an important related job. "It's to make sure that those changes in oil or beef or eggs or milk don’t broaden in the economy, don’t have second- and third-order effects," Warsh said. "That’s our job. That’s our commitment. That’s our capability we’re going to deliver on." The language is tidy, but the power is blunt: a central bank deciding what kind of pain gets managed, and for whom.
The Central Bank’s Next Move
Future rate hikes look more likely. The Fed has few tools to deliver on its new promise of price stability. Aside from shrinking its balance sheet, which would reduce liquidity in the economy, lead to reduced asset values, and eventually lower inflation, it generally aims to do so by setting a higher target range for its benchmark rate. Consensus is growing on the Federal Open Market Committee to do the latter. Warsh broke precedent by not submitting his projections for the federal funds rate, but nine members of the FOMC see room for a hike before the end of 2026. That compares with eight members who see the Fed holding the range steady, and one who sees room to cut.
The Fed cut rates three times late last year, responding to concerns about a slowing labor market. The projections for a hike now appear to be a response to inflation that has surged since the start of the Iran war and three months of solid job growth. Even though oil and gas prices have come down on news of peace talks between the two nations, experts say inflation will probably continue to run hot in the months ahead. The people at the bottom do not get to vote on these moves; they absorb the consequences.
“Regime Change” at the Fed
Warsh called for "regime change" at the Fed during his Senate confirmation hearing in April. An early signal of what he meant came just moments into his first news conference, when he announced new task forces focused on five areas of monetary policy: the Fed's communication, its balance sheet, its use of and reliance on existing data sources, its inflation framework, and productivity and jobs. "If there is a genuine effort to improve the Fed’s data, communication, and reaction function, that’s constructive," Christian Hoffmann, head of fixed income at Thornburg Investment Management, said in a note to USA TODAY. "Monetary policy is often presented as science, but it’s still very much art, and the current global framework is far from perfect."
Warsh said he plans to appoint both Fed insiders and outsiders to the task forces who will get to work within the next few weeks to give recommendations, not orders, for changes at the central bank to policymakers this fall. Gbenga Ajilore, chief economist at the Center on Budget and Policy Priorities, said focusing on the five areas Warsh identified makes sense, but that who he appoints will be important. "A lot of times, people will create a task force to do something that they already want to do," Ajilore said. “But then, the way I look at it, sometimes just because things happen the way they are happening does not always mean it’s the right way. I think about the data aspect – that task force. There might be better data out there, and so it might be a good thing to be able to actually just review it."
Less Guidance, More Fog
Warsh also followed through on the promise he made as a nominee for less forward guidance. In addition to not submitting his predictions in the Fed’s quarterly Summary of Economic Projections, the FOMC’s statement explaining its rate decision was nearly half the length it was after the Fed’s last meeting in April, and Warsh declined to answer reporters’ questions about the future. That lack of forward guidance could translate into more market volatility.
"It’s like being on a ship, and you have a destination, and it’s gotten a little bit foggier now," Ajilore said. "With more guidance, there’s a lot less fog, and you can see where the waves are going." For the everyday American, more market volatility could translate into more fluctuations in the stock market and their 401(k)s, he added. The people told to trust the system are left to ride the waves it creates.
After years spent badgering former Fed Chair Jerome Powell – whom he appointed in 2017 – and calling for lower borrowing costs, President Donald Trump brushed off the Fed’s decision to hold rates steady at Warsh’s first meeting. "It’s all right. Whatever," Trump told reporters on June 17 in Paris, adding that while he knows a rate hike could come later this year, "It’s hard to believe. It just keeps the country down." For now, the president appears patient with Warsh, whom he appointed in March 2026. He called Warsh a "good guy" and said he’s "guided by" what Warsh wants to do.
There was much speculation about how Warsh rejoining the Fed as chair would affect the institution’s independence before his first meeting. It followed the president’s attempt to fire Fed Governor Lisa Cook last year over allegations that she committed mortgage fraud and the Department of Justice’s decision to launch an investigation into Powell over a multibillion-dollar renovation project at the Fed’s headquarters. The DOJ dropped its probe in April, and Cook, who denied any wrongdoing, took the fight all the way to the Supreme Court. Justices heard the case in January but have yet to issue a ruling. At his first meeting, Warsh did not join Trump's calls for lower rates. His focus on taming inflation implied the opposite. "It’s basic game theory: a new Fed Chair has to establish credibility early," Hoffman said in the note. "If Chair Warsh doesn’t pick a fight with inflation at the outset, it’s extremely hard to rebuild credibility later." Truist’s Head of U.S. Economics Mike Skordeles said he thinks Warsh honestly "wants to do the right thing." "He’s not looking to flip the table and blow up the Fed," he added.