Americans hoping for relief from high borrowing costs did not get it on June 17, when the Federal Reserve left its benchmark rate unchanged at Kevin Warsh’s first meeting as chair. The central bank kept the federal funds rate at 3.5% to 3.75%, a decision that leaves credit card users and personal loan borrowers stuck with the same pressure while savers keep collecting higher returns on certificates of deposit and high-yield savings accounts.
Who Pays for the Fed’s Calm
Warsh used his first meeting to promise the central bank would deliver "price stability," while making clear that the Fed cannot have "a very significant effect on particular prices," including gas and groceries. Still, he said the institution has an important job in keeping those price spikes from spreading. "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."
That is the language of a powerful institution managing the fallout of prices ordinary people do not control. The Fed’s rate decision does not touch home loan rates much, since those track the 10-year U.S. Treasury note, but it does shape the borrowing costs that hit households directly. The central bank’s grip remains strongest where people are already squeezed.
Warsh sounded more hawkish on monetary policy than some investors and Fed watchers expected during his first press conference as Fed chair last week. The Fed’s preferred inflation gauge, the personal consumption expenditures price index, is due Thursday morning and covers May. Investors are watching closely after the CPI for May came in at a three-year high of 4.2%, with a major driver being the Iran war-related rise in energy prices. CNBC said oil prices have fallen on news of peace talks and a reopening of the Strait of Hormuz, and that if those prices hold or go lower, that could provide relief on inflation in the coming months.
Inside the Apparatus
Warsh broke precedent by not submitting his projections for the federal funds rate in the Fed’s quarterly Summary of Economic Projections. Nine members of the Federal Open Market Committee see room for a hike before the end of 2026, compared 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 in response 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.
Warsh called for "regime change" at the Fed during his Senate confirmation hearing in April. In his first news conference, 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. Warsh said he plans to appoint both Fed insiders and outsiders to the task forces, which will get to work within the next few weeks to give recommendations, not orders, for changes at the central bank to policymakers this fall.
That is reform in the familiar style: task forces, recommendations, and a promise that the people at the top will decide what counts as change. The institution remains in charge of its own review.
Warsh also seemed to follow through on his promise as a nominee for less forward guidance. 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, with more fluctuations in the stock market and 401(k)s.
The Bosses and Their Confidence Game
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." Trump, whom he appointed in March 2026, called Warsh a "good guy" and said he’s "guided by" what Warsh wants to do.
There was 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, and his focus on taming inflation implied the opposite. Christian Hoffmann, head of fixed income at Thornburg Investment Management, said in a note to USA TODAY, "If there is a genuine effort to improve the Fed’s data, communication, and reaction function, that’s constructive," and later added, "Monetary policy is often presented as science, but it’s still very much art, and the current global framework is far from perfect." Hoffmann also said, "It’s basic game theory: a new Fed Chair has to establish credibility early," and, "If Chair Warsh doesn’t pick a fight with inflation at the outset, it’s extremely hard to rebuild credibility later."
Gbenga Ajilore, chief economist at the Center on Budget and Policy Priorities, said, "A lot of times, people will create a task force to do something that they already want to do," and added, "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."
Ajilore also said, "It’s like being on a ship, and you have a destination, and it’s gotten a little bit foggier now," and, "With more guidance, there’s a lot less fog, and you can see where the waves are going." He said more market volatility could translate into more fluctuations in the stock market and their 401(k)s. Truist’s Head of U.S. Economics Mike Skordeles said he thinks Warsh honestly "wants to do the right thing" and added, "He’s not looking to flip the table and blow up the Fed."