Reasoning
The Federal Reserve, under Chair Kevin Warsh, has maintained a restrictive monetary policy with the federal funds target range at 3.50 to 3.75 percent since June 17, 2026, and has erased prior cutting bias. The June 2026 Summary of Economic Projections (SEP) median for the year end 2026 funds rate is 3.8 percent, significantly higher than the previous March median of 3.4 percent, with nine participants projecting rates above the current target range. This hawkish stance suggests a continued focus on inflation control, which typically dampens wage growth. However, the Atlanta Fed Wage Growth Tracker has shown resilience, and while recent data leading up to July 11, 2026, has not been provided, historical tendencies and the possibility of sticky wage pressures in a still somewhat tight labor market could push it above 5.0% in a second half 2026 release, despite the Fed's stance.Key uncertainty
The actual inflation trajectory for the remainder of 2026, which will heavily influence the FOMC's decision making and potentially lead to earlier or more aggressive rate cuts than currently anticipated, thereby affecting wage pressures.