Fed Watch – 6/19/2026

The below transcript is a literal translation of the podcast audio that has been machine generated by Adobe Podcast.

There’s a new sheriff in town at the Fed. But does that mean rates are going down? Welcome to this June 18th edition of Fed Watch. I’m Lauren Saidel-Baker at this week’s Federal Reserve meeting.

We did not expect a rate change, but there were still fireworks behind the scenes. This was Kevin Warsh’s first meeting as new chair of the Fed. And despite the steadiness and interest rates, we did get a lot of movement in the direction that he wants to take the Federal Reserve. Overall, the headline for rates no change this meeting. And overall, the committee is leaning toward higher rates to curb inflation rather than lower rates going forward. That is maybe not a surprise if you’ve been following us on Fed Watch, if you know our ITR inflation forecast. But it was interesting to see that even Kevin Warsh had a very firm tone on inflation during his statement. But that’s where things get a little bit more interesting.

So let’s get down to the statement itself, which was somewhat more abbreviated than we’d seen from Powell. And really, the first glimpse that we are getting into Warsh’s view, his broader vision for what the Fed should be. Does this mean we will get less communication coming out of the committee? Well, maybe not less, but it certainly will be different going forward. As mentioned, we got a much shorter policy statement. Many analysts are comparing this to a more Alan Greenspan esque type of minimalist language, maybe slightly less transparent or even outright cryptic in some regards. One notable data point that we didn’t receive from Warsh was his dot on the dot plot. He’s spoken out before about how he doesn’t think that guidance is helpful or should be something the Fed is doing. And so while other members of the FOMC did give their expectations, he did not. We were missing his dot on that dot plot, and we should expect to see that going forward. Otherwise, the dot plot was pretty evenly split between members who expect this year to either hold interest rates steady or see at least one cut compared to the number who see at least one hike. The median point was actually for a 25 basis point increase in rates by year end. So this is a slight turning point. Again, we saw that very strong inflation language coming even from Kevin Warsh. This is maybe not what President Trump expected when he did nominate this individual. He had some moderate tone, I think the word he used for this meeting was “whatever”. So we’ll see if there’s any more political dynamic to come.

But this really brings us back to the fact that the Fed is intentionally rather decentralized. All of these governors, all of these regional bank presidents, they serve very long terms, and they have their own views that they are bringing to bear on these rate decisions. It’s never just one person. However, that one person does influence a lot of the policy and especially the communication going forward. We saw in the press conference, Warsh talked a lot about these five task forces that he will be developing, really to delve deeper into the issues that the Federal Reserve is facing. One of them was communications, which, as we’ve talked about a lot, includes the policy statements, includes things like the SCP summary of economic projections, the dot plot. But there’s also going to be a committee or, excuse me, a task force on the balance sheet. We are very likely to see a smaller balance sheet come out of this Fed. That’s something that we’ve heard of in the past and do stay tuned, I am still hearing more of this balance sheet talk in terms of normalization of the size of the long balance, the large balance sheet.

So getting back to something that’s maybe a little bit more historically normal compared to the past ten, twenty years. We’re seeing the third task force formed on data sources, so expect to get more information there about the quality of data. Really, what data points are the most interesting to these members? Which ones they’ll be hanging their hat on? If you haven’t watched last week’s episode about different inflation metrics, I would encourage you to do that. We’re probably going to hear more about preferred gauges of inflation, as inflation does remain hot, front and center, in the hot seat of these Fed decisions. We’ll also see a task force on productivity and jobs. This is regards to AI and as they termed it, other transformative technologies. Much more to come on this research, which I think we will all find very interesting and we’ll delve into in a future episode of Fed Watch. And the final one is on the inflation framework. Just what do we need to see for inflation for these members of the FOMC to be comfortable? We’re not there yet, especially with regards to those near term inflation drivers, the war, the Strait of Hormuz, oil prices, etc. These issues all are somewhat still prevalent and coming up in these meetings. Generally, though, if we take a step back and look at this holistically, we’re seeing a little bit more emphasis coming from Walsh on private markets.

Now, if you have been watching Fed Watch, you know by now that we at ITR, we like to take our cues from the bond market. It seems like the Fed is moving more in that direction, which is an interesting dynamic when we talk about private markets versus policy influence on these things. So I’m somewhat encouraged. Again, this was an interesting first meeting, probably more interesting than many folks thought we were due for. We will be watching very closely going forward, especially things like market reaction. At this point, one day move doesn’t mean much except for the outright shift toward a more hawkish tone. So I’m not reading too much into what stock prices did this week.

Also, this week I want to add a quick reminder. We here at ITR had our State opportunity webinar. That was on Wednesday as well. So if you missed it with the Fed meeting, the policy decision coming out right about the same time, don’t think you’ve totally missed out. We are issuing a rebroadcast on the 25th, so join us next week. We’ll have a new live Q&A, if you do have additional questions about what this means for you, for your business, for your regional opportunities. Whatever happens from the Fed, there are going to be opportunities to outperform. And one of the easiest ways to target those opportunities is just to know which states will be at greater risk, or maybe seeing a little bit more resiliency. So I hope you can make that rebroadcast. Otherwise, please stay with us here at Fed Watch. We’ll be back next week with more. Thank you so much.