Fed Faces Split 2026 Rate Outlook as Markets Price 77% Odds of at Least 1 Hike

2 articles · Updated · Fortune · Jun 27

CME FedWatch shows investors pricing a 77% chance the Federal Reserve raises rates by at least a quarter point by year-end, even as a minority of economists still expect the next move to be a cut.
Bank of America now forecasts three hikes in 2026, citing firmer GDP and labor data, persistent inflation above the Fed’s 2% target, and Chair Kevin Warsh’s hawkish debut press conference.
Citi’s Andrew Hollenhorst argues the opposite case: oil has swung from shortage to surplus, real consumer spending was revised to a multi-year low, and growth outside AI-linked investment would have been just 0.5%.
He expects core CPI to cool below 2.5% by August from 2.9% in May, while softer payrolls and rising jobless claims could force markets to price out hikes.
Brookings’ Robin Brooks also sees Warsh’s tough tone as largely performative and says the June CPI report on July 14 could shift consensus toward cuts if lower oil prices feed through.

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Fortune1d ago

Federal Reserve Rate Policy: Economists Divided on Hikes vs. Cuts Amid Conflicting Data

The New York Times1d ago

A Divided Fed Holds Rates Steady - The New York Times

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Is the Fed being forced to choose between crushing inflation and triggering a deep recession?

June 2026 Fed Decision: Hawkish Hold at 3.6%, Warsh’s Regime Change, and Market Implications

Overview

In June 2026, the Federal Reserve, under new Chairman Kevin Warsh appointed by President Trump, held interest rates steady at 3.6% during his first meeting. This decision, supported by former Chairman Jerome Powell who remained on the board, marked a clear hawkish shift in the Fed’s outlook. Warsh, known for advocating a 'regime change' at the Fed, signaled a new direction in both policy and communication. The meeting’s tone and actions reflected Warsh’s vision for a more decisive and streamlined approach, setting the stage for significant changes in how the central bank manages and communicates monetary policy.

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