Reasoning
The Federal Reserve under Chair Warsh has signaled a hawkish stance by holding rates and removing the cutting bias, aligning with the June 2026 SEP median projection of 3.8 percent for the year end 2026 funds rate, which is above the current target range. With nine SEP participants projecting rates above the current range, it suggests a sustained period of higher rates or the potential for further increases, which would likely lead to increased market volatility as measured by the MOVE index. Historically, periods of monetary policy tightening or sustained high rates have correlated with higher volatility.Key uncertainty
The exact timing and magnitude of any potential further rate hikes by the Federal Reserve beyond the current target range.