Reasoning
The FOMC's decision to hold rates steady and remove the prior cutting bias at the June 17 meeting, coupled with the revised June 2026 SEP median projection for the year end 2026 funds rate at 3.8 percent (up from 3.4 percent in March), indicates a hawkish shift. With nine of eighteen SEP participants projecting rates above the current 3.50 to 3.75 percent target range by year end, further rate hikes or sustained higher rates are more probable than rate cuts in the remaining 2026 meetings.Key uncertainty
The direction of inflation and employment data in the coming months will be critical. A significant acceleration in inflation or continued labor market tightness could solidify the case for further tightening or holding rates higher for longer, while a marked slowdown could prompt a reconsideration of the current stance.