Hawks in the Fed: Nine FOMC members forecast a rate hike in 2026
The first meeting of the Federal Open Market Committee (FOMC) under the leadership of new Federal Reserve Chairman Kevin Warsh concluded with no change in the interest rate, but with an extremely hawkish signal for the markets. Contrary to the expectations of some participants, the regulator's rhetoric shifted dramatically in a hawkish direction: nine of the 18 committee members now forecast at least one rate hike in 2026. This represents a stark contrast to the previous consensus, which leaned toward a cut or, at the very least, a prolonged pause.
The Fed left the target range for the federal funds rate at 3.50–3.75% as of June 17, 2026. The market had priced in this scenario for the fourth consecutive time, but the hawkish stance of the leadership came as a surprise. The FOMC statement completely omitted any wording about "additional rate adjustments," which is a direct signal of a policy reversal amid persistent inflation hovering around 4.2% year-over-year.
Shift in Rhetoric and Market Reaction
The committee shifted to a neutral rhetoric, stating that it is now fully focused on incoming economic data. However, in practice, this means a tightening of policy. Warnings about the growing risk of a rate hike as early as September, previously voiced by analysts at Citadel Securities, have now received official confirmation. Key drivers of this shift include strong wage growth, sustained consumer activity, supply chain issues, and massive investments in AI, which continue to fuel inflationary pressures.
Markets reacted immediately and predictably. Wall Street turned negative: the S&P 500 fell by 0.6%, the Nasdaq Composite lost 0.7%, and the Dow Jones Industrial Average dropped 160 points (0.3%) by mid-session. Government bond yields surged sharply: two-year Treasuries rose nearly 11 basis points to 4.153%, and ten-year yields increased by 4 basis points to 4.469%. The U.S. dollar also strengthened.
First Test for Warsh
Kevin Warsh's first press conference was held under close scrutiny. He emphasized a more "calm" approach at the Fed and minimizing forward guidance, which was perceived as an attempt to reduce nervousness. However, the meeting's outcomes contradicted the dovish expectations associated with his appointment and demonstrated the committee's determination to keep inflation under control, even at the cost of slowing economic growth.
The final result points to growing divisions within the Fed itself. This is especially true against the backdrop of the energy shock caused by the situation around Iran, which fuels inflation and adds uncertainty to economic dynamics. Fidelity managers had warned of potential volatility in the bond market due to unclear future signals—and their forecasts proved accurate.
My comment: The market appears to have underestimated the speed of the Fed's tone shift. If nine committee members are already voting for a rate hike, by the end of the year we could see not just a pause but a full-fledged tightening cycle, which would be a serious test for risky assets, including cryptocurrencies.