In the early hours of June 18 Beijing time, the U.S. Federal Reserve’s Federal Open Market Committee (FOMC) voted unanimously 12-0 to keep the target range for the federal funds rate unchanged at 3.50% to 3.75%. This marks the Fed’s fourth consecutive decision to hold steady since it completed a run of three consecutive rate cuts in December 2025. The rate decision itself is consistent with market expectations—ahead of the meeting, the interest-rate futures market priced in a 99.6% probability of no change.
However, what truly surprised the market was the Summary of Economic Projections (SEP) and the dot plot released alongside the decision. Of the 18 officials submitting forecasts, 9 expect at least one more rate hike in 2026, 8 expect no change, and only 1 expects a rate cut. By end-2026, the median federal funds rate rises from 3.4% in March to 3.8%. At the same time, the Fed sharply raised its 2026 PCE inflation forecast from 2.7% in March to 3.6%, and core PCE from 2.7% to 3.3%. Fighting inflation has once again become the Fed’s policy mainline.
This is the first FOMC meeting since Kevin Warsh took over as Fed Chair. From the length of the statement to whether the dot plot is provided, from the abandonment of forward guidance to the establishment of five working groups, Warsh’s debut reveals a style that is clearly different from his predecessors in every respect. The market quickly priced it as a “hawkish hold”—U.S. stocks flipped from gains to losses, Treasury yields jumped, the U.S. dollar strengthened, and both gold and Bitcoin came under pressure at the same time.
Why the market interprets this “hold steady” as a hawkish signal
Keeping rates unchanged by itself is not enough to qualify as hawkish. The market’s hawkish interpretation comes from three layers of signals stacking together.
First, the dot plot shift is quantitative. In the March meeting, the dot plot still implicitly suggested one rate cut during the year; but the June dot plot not only removed all expectations for rate cuts, it also pushed any potential rate cuts further back to 2027 and 2028. Nine officials expect at least one hike during the year—3 expect one hike, 5 expect two hikes, and 1 expects three hikes. Half the decision-makers shifting to rate-hike expectations is almost unimaginable in March.
Second, the hawkish shift in the statement wording is structural. This policy statement contains only 130 words, compared with 341 words for the statement at the April meeting. The reduction in length is not simply about tightening— the statement deleted the “easing bias” language that had been used for half a year, and removed the forward-guidance that the “next policy adjustments are more inclined toward rate cuts.” At the press conference, Warsh made clear that the Committee unanimously believes that forward guidance “is not suitable for the current stance of policy,” and that the Fed has “abandoned forward guidance.”
Third, the wording used in the inflation assessment is tougher. The statement notes that inflation remains above the Fed’s 2% target, partly reflecting supply shocks (including energy) driving prices higher. Unlike the April statement’s emphasis on being “steadfast in support of” full employment, this statement simply says the Committee “will achieve price stability.” The shift in the weight of the wording itself is a signal.
Why Warsh refused to submit a dot plot—and what it means for the Fed’s communication framework
This dot plot has an extremely unusual feature: out of 19 meeting participants, only 18 submitted rate forecasts. Warsh confirmed that he himself did not submit his dot plot rate outlook.
Warsh has long been a critic of the dot plot. He has repeatedly questioned the effectiveness of this forecasting tool, arguing that the dot plot and other forward-looking policy guidance tools would constrain policymakers’ flexibility. At the press conference, Warsh said that for him, providing a dot plot is “not helpful” in executing policy, and that the FOMC does not think it is constrained by rate forecasts. Some Fed observers even speculated that Warsh may push for the complete abolition of the dot plot mechanism in the future.
This marks a profound change to the Fed’s communication framework. Over the past decade-plus, the Fed has provided the market with highly explicit signals about the policy path through the dot plot, the SEP, and forward guidance. Warsh’s approach is completely different—less guidance, fewer commitments, and more reliance on data. At the press conference, he said that in the current environment, “traditional forward guidance is not appropriate.” For the market, this shift implies that the Fed’s “transparency” will give way to “flexibility,” and the certainty the market receives from the Fed’s policy signals will systematically decline.
How the five working groups reshape the Fed’s policy-making infrastructure
In addition to the rate decision and the dot plot, another major move in Warsh’s debut was the announcement of five specialized working groups. These five groups cover key areas of the Fed’s core functions: the monetary policy communication mechanism, balance sheet management, macro data sources and a data-dependency framework, research on productivity and the jobs market, and the impact of an inflation policy framework and new technologies such as artificial intelligence on monetary policy.
Warsh said the working groups will conduct in-depth reviews around the Fed’s core mission of keeping prices stable and ensuring employment. Detailed work plans will be disclosed in the coming days. All working groups will complete, or complete most of, their work by the end of the year.
The significance of these five reforms should not be underestimated. The communication group will provide recommendations on adjustments to the Economic Projections Overview (SEP)—which directly affects the future form of tools such as the dot plot. The balance-sheet working group will assess appropriate reserve responsibilities—Warsh previously criticized that the Fed’s large balance sheet had fueled inflation and distorted markets. The inflation framework working group will examine the drivers of inflation—but Warsh clearly stated that the 2% inflation target is a core mission of the Fed that will not change in the long run. Until inflation stabilizes back to the target range, it “will not re-discuss adjusting the inflation framework.”
Warsh’s goal is to build a Fed that has a “clear recognition of its mission, adapts to objectives, and focuses on the future.” In essence, these five working groups are rebuilding the “infrastructure” the Fed relies on to set policy—from data sources to analytical frameworks, from communication methods to balance sheet management. This is a systematic operational reform, and its impact will extend beyond any single rate decision.
Why inflation expectations were revised sharply higher—and how fighting inflation returns as the policy mainline
Behind the hawkish turn in the dot plot is a comprehensive upward revision to inflation forecasts.
The Fed raised its median forecast for overall 2026 PCE inflation from 2.7% in the March projection to 3.6%. It also lifted core PCE from 2.7% to 3.3%. The size of this adjustment is quite rare in recent years’ SEP updates. Decision-makers believe that higher energy prices triggered by the Middle East conflict, along with related supply-chain disruptions, may have a more persistent impact on prices than previously expected. In fact, the year-over-year increase in the U.S. CPI for May has reached 4.2%, and April’s PCE price index rose 3.8% year over year.
Meanwhile, the Fed cut its 2026 GDP growth forecast from 2.4% to 2.2%, and reduced the unemployment rate forecast from 4.4% to 4.3%. This suggests the Fed is facing a macro mix of “slower growth but stubborn inflation”—the risk profile of stagflation is becoming clearer.
At the press conference, Warsh emphasized that FOMC participants “are experiencing inflation far above the 2% target,” and that the 2% inflation target is the Fed’s long-term objective. “As long as it hasn’t been achieved, there’s no reason to re-evaluate.” He acknowledged that over the past five years, the Fed failed to clearly convey its policy resolve to bring inflation down. This institutional reform will focus on fixing communication shortcomings.
From March to June, the Fed’s policy narrative shifted from “rate cuts in sight” to “within consideration of rate hikes.” With fighting inflation returning as the policy mainline, in the Warsh era this mainline may be more firmly held than in the prior period.
How a hawkish hold hits U.S. equities, Treasuries, and dollar pricing
The market’s reaction to this FOMC is a typical “hawkish shock” pattern.
In equities, all three major indexes closed lower. The Dow fell by about 507 points, down 0.98%; the S&P 500 dropped 1.21%, and the Nasdaq fell 1.34%. The Nasdaq-100/“seven big tech” index in the U.S. (Wind US tech megacaps) fell more than 2%, META fell more than 5%, and Microsoft and Amazon fell more than 3%. Overvalued growth stocks are most sensitive to rate expectations, and the heating-up of rate-hike expectations directly compressed the valuation center of growth stocks.
The Treasury market saw a notable split. The yield on 2-year Treasuries surged 13.9 basis points to 4.184%, 3-year rose 12.34 basis points to 4.212%, 10-year rose 5.34 basis points to 4.489%, while 30-year slipped slightly 1.4 basis points to 4.929%. The pronounced differentiation between the short end and long end caused the yield curve to flatten abruptly. The short-end rates react most directly to policy expectations; the sharp jump in the 2-year yield reflects that market pricing for hikes within the year is rapidly converging toward the dot-plot median expectation. CME FedWatch data shows that after the decision, the market-implied probability of a rate hike in October rose to 60.7%.
The U.S. Dollar Index (DXY) was pushed to multi-month highs. The logic behind the dollar strengthening is clear: if the Fed reopens the rate-hike window while other major central banks remain on hold or easing, interest-rate differentials will expand systematically, and the momentum for capital to flow back into the dollar will continue to strengthen. Gold, meanwhile, faced dual pressure from rising real yields and a stronger dollar; London spot gold briefly fell by more than $150 per ounce.
How rising rate-hike expectations affect crypto market liquidity expectations and risk appetite
Crypto assets also were not spared in this hawkish shock.
As of June 18, 2026, based on Gate market data, BTC/USDT briefly fell below $64,000 after the FOMC decision, with a low of $63,992.9 and a 24-hour drop of 2.63%. Before the decision, Bitcoin had already pulled back from around $65,500; after the decision was released, overall sentiment in the crypto market remained under pressure.
Bitcoin’s sensitivity to the Fed’s policy path has been repeatedly validated over the past two years. If the Fed reopens the rate-hike window, liquidity expectations will tighten—higher rates reduce overall market liquidity, making risk-free assets such as Treasuries relatively more attractive than speculative assets. Overvalued tech stocks, crypto assets, and gold will all be re-priced first. Over a longer time horizon, even though the 40-day correlation between Bitcoin and the Nasdaq has fallen to zero, changes in the macro liquidity environment still transmit to crypto through channels such as the U.S. Dollar Index, Treasury yields, and risk appetite.
The hawkish tone in the Warsh era carries more complex medium-term implications for crypto assets. A more hawkish Fed focused on controlling inflation can suppress risk assets in the short term by tightening liquidity; but if hawkish policy ultimately succeeds in bringing inflation back into the target range, a more stable long-term macro environment could instead provide support for risk assets. The key is the path—where the “end point” of rate hikes is, and how long the market needs to digest the repricing transition from rate-cut expectations to rate-hike expectations.
From Warsh’s debut: a paradigm shift in the Fed’s policy framework
Warsh’s debut is not just a qualitative question of being “hawkish” or “tilting hawkish.” It marks a paradigm shift in the Fed’s policy framework.
The first dimension is a shift in communication philosophy. From Greenspan’s “intentionally ambiguous,” to the “forward guidance and transparency” of the Bernanke–Yellen–Powell era, and then to Warsh’s “less guidance, more data dependence”—the Fed is undergoing a swing-back in its communication framework. A statement of 130 words, the refusal to submit a dot plot, and the explicit abandonment of forward guidance are not isolated tactical choices, but a coherent philosophical expression.
The second dimension is a shift in policy priorities. In past years, the Fed maintained a delicate balance between inflation and employment. The signal from Warsh’s debut is unambiguous: inflation overrides everything. The statement does not mention the inflation target but emphasizes “will achieve price stability.” The dot plot comprehensively revised up inflation expectations, and Warsh himself repeatedly stressed that the 2% target is non-negotiable—fighting inflation is not only a choice of policy tools, but the core of the policy narrative.
The third dimension is a shift in institutional infrastructure. The five working groups are not patching up the existing framework; they are rebuilding the entire infrastructure the Fed relies on to formulate policy—data sources, analytical frameworks, communication methods, and balance-sheet management. This is a rewrite of the “underlying code,” and its impact will run throughout Warsh’s entire tenure.
What changes between market expectations and policy paths
The dot plot suggests half of the officials expect at least one rate hike this year, but hikes are not a sure thing. Warsh himself emphasized that the dot plot is merely scenario judgment with an “eraser,” not a commitment to future policy paths. At the press conference, he stated that the current economic outlook is “highly uncertain.”
This uncertainty itself becomes the new normal the market needs to adapt to in the Warsh era. Previously, markets were accustomed to extracting clear path signals from the Fed’s forward guidance; but Warsh’s logic is: since the outlook is highly uncertain, there should be no clear guidance.
From current market pricing, bets on at least one hike within the year are already above about 80%. But the specific timing and magnitude of any hikes will depend heavily on the inflation data over the coming months—especially the trajectory of energy prices and how the Middle East situation evolves. The uncertainty mentioned in the statement attributable “in part to the Middle East conflict” implies that geopolitical factors have been formally incorporated into the Fed’s decision-making consideration.
For crypto market participants, this means the future macro environment will be even harder to predict. With the Fed no longer providing clear forward guidance, the market can only judge based on the data itself—and data volatility is already increasing. The magnitude of fluctuations in liquidity expectations may widen, and valuation volatility for risk assets may rise accordingly.
FAQ
Q: Did the Fed actually raise rates at the June FOMC?
No. The Fed kept the target range for the federal funds rate unchanged at 3.50% to 3.75%, marking the fourth consecutive hold. However, the dot plot shows that half of the officials expect at least one rate hike during 2026.
Q: Why didn’t Warsh submit a dot plot?
Warsh has long criticized the dot plot and other forward-looking guidance tools, arguing that they would constrain policymakers’ flexibility. At the press conference, he said that providing a dot plot is “not helpful” for implementing policy.
Q: What does raising the PCE inflation expectation from 2.7% to 3.6% mean?
It means the Fed believes inflation persistence is far higher than the expectation in March. The increase is as large as 0.9 percentage points—extremely rare in recent SEP updates—and it directly drove the hawkish turn in the dot plot.
Q: What impact will this have on the crypto market?
Rising rate-hike expectations mean tighter liquidity expectations, and overvalued risk assets face repricing pressure. As of June 18, 2026, BTC/USDT is reported at $63,992.9 in Gate market data. But the long-term impact depends on the final path of rate hikes and the actual inflation trajectory.
Q: What are the five working groups?
Warsh announced the creation of five specialized working groups to review the impact of the monetary policy communication mechanism, balance-sheet management, macro data sources and a data-dependency framework, research on productivity and the jobs market, the inflation policy framework, and new technologies such as artificial intelligence. Each working group will complete its work by the end of the year.
Q: Will the Fed really raise rates this year?
Not necessarily. The dot plot reflects the officials’ forecasts based on current data, not a commitment. Warsh himself stressed that the current economic outlook is “highly uncertain.” Whether there will ultimately be a hike depends on inflation and employment data over the coming months.
