Power Lunch - Federal Reserve keeps rates unchanged in Kevin Warsh’s first FOMC Meeting as Chairman 6/17/26

Episode Date: June 17, 2026

Major averages tumbled as treasury yields jump following the latest decision and statements from the Federal Reserve. Brian Sullivan and Kelly Evans are in Washington to digest the stock and bond market reactions to this month’s interest rate decision from the Fed.  In his first press conference as Chairman, Kevin Warsh announced he will create five new task forces to overhaul the Federal Reserve’s operations.   Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

All right, welcome, but welcome back, everybody. We've got a huge hour ahead for the markets and your money. This is our special Fed coverage live here in Washington, D.C. I am Brian. She is Kelly. We are less than what, about five minutes away. The Federal Reserve, Kevin Warsh, as the new chairman's first decision on rates. Let's be clear. Nobody, nobody expecting a rate cut today. But all eyes are going to be on Kevin Warsh delivering that first major message on inflation, markets, and the path ahead. quick glance at the market so you can see the setup going into this. We have slight gains across the board. Best performer is the Dow helped as we have been seen. It's a third straight record for the Dow, but let's not get ahead of ourselves because we have yet to hear from the new Fed chair, small caps leading the way up 1.3%. There we go. All right. So let's turn now to our All-Star panel. Again, just a few

minutes away from the Fed decision. Joining us, David Kelly of JP Morgan asset management, Francis Donald of RBC Capital Markets and Claudia Somm of New Century Advisors, both on set. David, I'll start with you there, stuck at the NASDAQ in New York City. What do you expect? Not in rates. Nothing's going to happen, but how do you expect worse to do today? Well, I think he's going to try and bring consensus, actually, even though he says he likes a bit of a fistfight. I don't think he really does. I think you'll see a 12-0 vote in favor of what they do today, which is going to be no change. I think you start with a summary of economic projections. The summary of economic projections, relative to March, is going to say stronger growth.

It's going to say higher inflation. It's going to say lower unemployment. I think that also means they remove the possibility of a rate cut this year, so no change in the short-term in rates. And when you do that, you also remove the easing bias implicit in the statement. So I think all that will be done. And then Kevin Warsh will just say, look, the economy is in good shape here. It's good shape, good momentum, no reason for us to be doing anything here or even signaling anything here. I think that's going to be his message today.

Francis? I think today's all about style. How does he bring consensus? How does he bring credibility to the narrative? what are the sort of breadcrumbs that we see about how his style is going to evolve. But honorable mention, I want to hear what Kevin Warsh has to say about inflation. I agree with Claudia Sam here. Kevin Warsh and the American people have an inflation problem, and it needs to be addressed.

I don't think he can get for today without talking about inflation. Claudia? I think while he's going to want to be building consensus, there's been a lot of disagreement among committee members. There's been a lot more discussion about the possibility that a rate hike might be appropriate later this year. And while, you know, he shouldn't be signaling the future, just like, what are people looking for? What is that debate? Like, really put it out there and let us understand what the committee members are looking for in the data and what they think is happening

with inflation. I don't know. You know, Francis, he was, Kevin Warsh is pretty critical of the Federal Reserve and its balance sheet. Now he's the chairman. He can actually do something about it. Does he? Well, there are 12 voting members on the Federal Reserve. So he's got to convince 11 other members to move to his direction. This is a very important. This is a very important. a Kevin War story, but it's not entirely a Kevin War story. The data determines how the Federal Reserve moves. The rest of the voting members to determine how the Federal Reserve moves. So yes, today is a monumental day. We're going to find out what the next four years look like in terms of style, but it's not everything. Quick word, David?

Yeah, and I think that's right. But I think the style is going to be important here. And I think he will try to avoid really sickening where he's going from here. He can't do anything about the balance sheet in the short run. That's a long-term project. And there are no No easy choices. You know, do you want to push up mortgage rates? You want to push up long-term interest rates? That's what happens if you reduce the assets out of that balance sheet. He doesn't want to be responsible for that right now.

Well, let's find out what kind of style and words that he uses because it's happening all now. Steve Leesman with the Fed's call on rates. The Federal Reserve in the first meeting under new chair, Kevin Warsh, Chairman Kevin Warsh, keeping rates unchanged in unanimous vote of 12 to 0. The statement, by the way, has been dramatically shortened to four quick paragraphs. a third of the length of the prior statement. The easing bias was dropped as expected from the prior statement. The Fed reaffirms its policy really answering David Kelly right there of maintaining

ample reserves. So no discussion really about changing the balance sheet, at least not at this point. Economic activities have to be expanding at a solid pace despite elevated uncertainty, the uncertainty linked to the conflict in the Middle East. They noted strong productivity growth and capital investment. Job games have kept pace with the workforce, the statement says, inflation remains elevated relative to the 2% goal, reflecting the supply shocks that are out there, and then it ends with a simple declarative statement. The committee will deliver price stability. On to the forecast where there's a lot more interesting things going on, and what is happening there,

first of all, only 18 of 19 officials submitted projections. Does raise the question about whether Warsh did not submit one, as has been widely speculated on Wall Street. We do not know if the person who did not submit was. Kevin Warsh. There was a sharp upgrade in the funds rate projections. Nine officials now projecting a rate hike this year. Five of them see two hikes this year. One sees three hikes. However, eight are projecting the Fed to hold. One sees a cut. So the funds rate averages out to 3-8 from 34 from the prior forecast, a really divided Fed on this issue. On average, rates are seen at the current level of 362 next year declining eventually to the neutral rate, which remains on

change at 3.1. There was a sharp upgrade in both core and headline PCE inflation forecast to 3.6 from 3.7, this year on headline and from 27 to 3-3 on core. The core remains elevated next year. That might be important at 2.5%. So I'm recapping here, a unanimous vote, a much shorter statement, no forward guidance in the statement. They removed a lot of the distigial stuff from the statement that was really, my opinion, kind of worthless about how the Fed will make its decisions. And they also show a divided committee when it comes to the outlook on rates. Brian, back to you.

This statement is so short. It's practically a tweet. I mean, this entire statement is one sentence, then two sentences, then two more sentences than another and then it ends. I mean, this is the shortest, Steve, this is the shortest Fed statement. This almost looks like a news alert. Well, it almost looks like a Greenspan statement, if you really want to know. I did a calculation. I don't have it in front of me, but the statement, a number of words went like this, came down under Powell, but it's now come down much more to kind of where

Greenspan was, simple declarative statements. They took out a lot of stuff that didn't need to be there. There's this thing that would put things into the statement, Kelly, when they needed to put it in to get somebody to vote for the statement, and then it would just stay there for no reason at all. A lot of that stuff's gone. But what's interesting is that there is no forward guidance in this statement about which way rates are headed. That's the important missing sentence that is something we're going to have to deal with and figure out. Maybe we'll get some more guidance or not at the press conference. Fair enough.

Maybe we will. Let's hope we do. Steve, stick around. We're going to go back to our panel here because, yes, the statement is shorter. So Kevin Warsh, France is already putting his mark on the Fed. But when I hear Steve Leasman say, you got five people per the dot plot, summary of economic projections, SEP, 5C2 rate hikes. one sees three hikes.

We were talking about cuts a few months ago. Now we got multiple Fed people talking about rate hikes. Look at the market's reaction. I mean, this is a big hawkish reaction. Well, look at their inflation forecast. Steve just told us that they materially upgraded core inflation expectations to above 3% for this year and to next year.

That's right. We have 40% of the CPI basket that is growing above 3%, including food, housing, daycare, medical care, even pet services are growing at several. percent year over year. This is a Fed that is now beginning to recognize that energy was one inflation issue, but it's not the inflation issue. And the Fed moves have to follow the data. We're hearing this from the Federal Reserve today. So there'll be a lot of discussion about,

you know, worse taking off the training wheels that Powell is giving us for so long, maybe gentle parenting us into our own independent views of the Fed. That's fair. But to me, the story right away, inflation. About an eight basis point pop in the two year to four-13. There's the tenure up about four to four, 46 or so, Claudia. That's the market. We stocks were green going into this or down about half a percent. Not a huge move yet, but we've often seen at these junctures, the early reaction to the meeting, whatever happens with his press conference,

if it gets worse, can beget the trading patterns sometimes until the next Fed meeting. Right. Well, and I think the market reaction at this point is largely to the dot plot, to the summary of economic projections being much more hawkish. I mean, you know, the world just changed a lot, right, in terms of the inflation picture. and in March, that was early days of the conflict in the Middle East. So, right, like, they're just reacting to a lot of inflation. Now we do have that missing dot.

And if that is the chairman, and he has not put in a projection, I think we could see in the press conference a real effort to kind of cut the legs out from under those projections. It's a big dot, if it is the Fed chair. Let's go down to Chicago and get reaction for the bond market. And who am I to disagree with the great Claudia here, Rick? But I will say that to Francis's point, it's like the Federal Reserve officials suddenly got a dog. Or they suddenly started driving, or they suddenly went to the grocery store because all that inflation is building up for five years. Gas is a big deal.

All the stuff petroleum goes into is a big deal. But suddenly it's like now we're finding religion on inflation and the market is reacting. What is your take to the state? Well, I think the last comment by Ms. Somm was spot on. The market's reacting to the dot plots. The short statement that Kelly refers to, thank God, what's really changed? They talk about supply shocks, and we see what's going on with the price of gas, price of crude oil futures, what's going on with the equity space.

This is all a dynamic movement of what's going on in energy. The dot plots are already going to be old news, and historically, they've never been good news because they've never been very accurate. So if you look at a two-year prior to the statement, we're at 405, so we're at 414. The high watermark on a closing basis is 416. We haven't challenged that yet. If you look at the 10 year, prior to the statement, it was 444, now we're at 446. A couple of basis points. Excuse me, we're right around 442, so now we're at 446.

High watermark there is well above where we're trading. It's 467. That was from the 19th of May. The dollar index did the same thing. It jumped, but then it came back down a bit. And I think that's interesting. So, yes, it jumped, not huge, didn't quite make it to 100. where it's hovering, big psychological level,

I will point out the dollar is significantly higher than pre-Middle East conflict. And that is something to pay attention to. But I think to summarize, listen, I think Mr. Warsh is definitely going to have to cut his teeth and make his mark on history. All of that's quite important. But the reality of the situation is,

the economy's doing pretty good. We're really never near 2% inflation before the conflict. Post-conflict, we're going to have to deal with how the markets move, how the energy complex prices, before they can weigh in on it. And as the panel is duly noted, that the Fed needs to act to data-based information. So what the dots say are building in a couple tightenings by some of the members towards the end of the year. It's all interesting chatter around the water cooler, but in the end, it's not really what the market's going to be looking at tomorrow.

Interesting to see the dollar flirting with the 100 level there, which is significant. Again, if it stays there, if what we think we know now is reinforced, I guess we should put it by the data, that is a big deal. We're heading back towards some multi-year highs. Rick, thanks. We appreciate it, Rick Santelli. Thank you. Want to just turn back to our panel now. David Kelly, what are your thoughts?

Well, it was mostly as expected, except that dot plot is a little on the hawkish side. And I actually think the data is not going to support a rate hike this year because the key thing is in May we had 4.2% in CPI inflation. I think that's the peak. We're down about, I think gasoline prices are going to be down about 8% this month relative to last month. That's going to bring the year over year down to 3.9. We've got the highest rental vacancy rate in eight years. And so the big chunk of the CPI is overstating inflation in the shelter sector.

I think that's going to come down. I think tariff rates overall are coming down. We're past the high watermark in that. We're not seeing wages accelerate here. So I put all of these pieces together, and it tells me that inflation, it'll be coming down. It'll be coming down slowly and maybe more. than people would like, but it'll be coming down anyway. And in that environment, do you really want to poke the bear by raising rates now and being responsible for maybe triggering an overreaction in the

economy? So my guess is the Fed may talk about the possibility rate hike. In the end, I don't think they're going to deliver one. Ever? No, well, no. Well, maybe at some stage, but I think there's a possibility that if you have a divided Congress going into next year, then fiscal stimulus goes away and actually growth and inflation could both spend some time below 2% at some station next year. So I think that for this cycle, we may have seen the peak in inflation. We may still have seen the peak on rates. Steve Leesman, okay, so I want to go back to the headlines, 18 of the 19 Fed officials submitting that dot for their summary of economic projections.

Do you think we'll ever find out if it is, Kevin Warsh? I mean, is there a chance at the press conference? Maybe Steve Leesman will ask him, who knows, was it you that left out your dot? because, again, while one of 19, if you're the chairman, that's a pretty big dot. Yeah, I don't know, Brian, if that's the most important question to ask, but it is an important one, I guess. I have to think about that. What I did want to report, Brian, is that I'm looking at initial flows here, really responding to what David Kelly was talking about and how the market thinks about this.

I'm looking at a 69% probability of a rate hike in September. and then I see nearly 83% or sorry, 78% probability of one in December. So the market reacting very quickly to this. And it may be that David Kelly is right, that the Fed can threaten or jawbone the market to thinking rate extra coming and then not having to deliver. But right now the way the market is trading. And I mean, just look at the two-year, David.

A two-year is telling you and has told you for a very long time that rates are likely to be higher than they are, much more likely it would be higher than there to be lower. It's 414. You're talking about a 362 on the Fed funds rate, so there's quite a slope there. It's a close call, but we've seen, you know, we've seen oil prices come down below 80. I think the administration is going to do everything you can to pump oil into the global economy, and that's going to bring down U.S. inflation.

So, again, it's going to take a long nerve in the Federal Reserve to actually raise rates into a declining inflation environment later on this year. I think I feel like, Claudia, we've been saying rate, rate cut, rate cut, because the president's been saying it, I think we have to stop that conversation, because if I'm looking out to the CME's Fed Watch tool, and again, just projections, this could change for the December meeting, what Steve Leasman just referenced, 39% chance that rates stay where they are right now, 43% chance they go up by one quarter of 1%. And here's what's amazing. 15% chance that in December rates are half a percent higher than they are now. Higher. We've got to kill the

rate cut conversation. It's over. I think the inflation did that for us. I mean, I don't think we're going to have a lot of conversation in the press conference about a rate cut, not in the near term. And really, the path of energy prices through the end of this year are going to be so important for what does the Fed do by the end of the year. And I thought it was interesting, Francis, that David said he thinks that the May report, that was last month for CPI, that that will be the high water mark? Because will the conversation change if we start to at least improve a little bit on that front? Well, the math of it is that we probably saw the worst of the year over year, but a reminder, Americans are up 25% in terms of the cost of living. And what worries me is now,

what was the high water markets? Where do we get stuck? Core inflation is going to be stuck in the high twos or low threes, regardless of what happens to energy ahead. And that's the big problem for the Fed. And when I look at this statement today from Kevin Warsh, my favorite quote from him, he wants the Fed to be back on page B12 of the newspaper. He told us this. And so he shortened the statement, but my goodness, challenge accepted. I could cut it. come up with a front page story here. What would it be? Right.

Okay, write your headline. I'll do it right now. Joining the news network. The most important line here is the last line of the statement. The committee will deliver price stability, not price stability in full employment. Price stability. Emphasis on the inflation here. She does protest too much a little bit, I think, because inflation is going to be a challenge

for them. But look at the bias in the statement. That's a front page story to me. I know. Steve Leesman, I know you want to jump in. Maybe you can write your own headline. but did Kevin Warsh just sort of directly or indirectly kill the second Fed mandate along with the dots? I feel like today's meeting was a lot more dramatic in many ways than maybe we thought it might have been.

I think that's right, Brian. I agree with you on that. And notice that he reaffirmed the 2% target in there kind of on the slide. I want to make a point that I believe Francis was making. And I want to remind you of the very obvious notion that these statements are good as of today. The forecasts are good as of today. And the people who wrote down those forecasts about future inflation and rate hikes know already or knew already that oil prices had come down. So the statement that was made earlier, what the Fed appears to be looking at is an inflation problem that transcends the oil price problem, that they're looking at what they believe to be stronger underlying inflation that's inside the core. And there's this notion of the persistence of inflation that's a big part of Federal Reserve and Central Bank thinking about inflation that says you only get rid of it by hiking rates or through a recession and that you just don't sit here and watch it dissipate on its own. Claudia, what would you add to that?

So the one thing I'd say is I don't think the statement is dropping the maximum employment mandate. I do think it's signaling that on the employment side, things are in good shape. Labor market stabilized. We're very close to full employment, maximum employment. the problem right now is on the inflation side. So I think they're trying to be loud and clear. Like, we see the problem, and we're going to do our best. It may not be a rate hike.

It may be a hold over a period of time, but they are focused on the problem. Well, it feels like it's, if not a rate hike. It's a warning of a rate hike. And I bring this up because, listen, everybody around this table, you guys are talking about rates in a different way. For a lot of our viewers and listeners, maybe they want to buy a house. They're waiting for mortgage rates to come down.

I think, tell me if I'm wrong, Claudia, this is a pretty loud and clear mess for the Federal Reserve and the bond market that borrowing, costs are not coming down, if anything, they might go up. And I hate to say that because I know a lot of people want them to come down, need them to come down. The only counter to that would be if they perceive that they have to slow the economy in order to conquer the inflation problem. If they perceive that they have to hike, you could see the 10 years start to come in a little. The economy is doing well. They said it. It's expanding. Exactly. So if they have to hike rates,

I mean, it's, you know, at some point that I would just wonder if the 10 year could, if the long end could be more stable as a result. If look at what happened. when they did that 50, that half point cut going back a year and a half now. That's when you saw the long end take off. That's what set mortgage rates higher. That rate hike never made sense, a rate cut never made sense. And now it makes less sense. No, and I mean, and conditions, conditions can change and we're now.

But I think that, you know, we talk a lot about like, oh, there's inflation. The Fed should hike rates. I mean, we should understand. Hiking rates comes with a cost. Like, you are pulling demand out of the economy. For that person who's on the fence about buying, like, they're bearing that cost, right? So there's not an easy solution. This is why the Fed thinks really hard about raising rates or even holding rates in

environment. It is a cost, but they're trying to pull in demand. That's the one thing they can do with their tool to try and get inflation under control. But there's a lot of factors that are playing out with inflation right now. I wonder how many, and I'm just going to say something, Francis, you could ignore me. I wonder how many people in COVID refinanced like a five-year mortgage. And that's going to come up now for reset. And they're not going to be looking at low rates.

their mortgage rate may triple because mortgage rates, too, agree to me, they're not coming down here in the States anytime soon. Well, this is the point that Claudia makes I completely agree with, which is that when the inflation in the system is being driven by things like supply shocks, by massive AI infrastructure, which is referenced here in this statement, there is a cost, and the cost is going to be born to low and middle income Americans who are already showing signs of distress and whose buffers have been worn down by our gas prices. We can get very excited here about the inflation leads to a hike, but there are a constant. to hike. So we'll come back to the economy here. It's not Kevin Warsh who's changing the story.

It's the inflation narrative. I agree with Claudia on that. And then there will be impacts to the economy from the changes in the hikes or the holds that come forward. So start with the economy and with the economy. The Fed is the middle player in this narrative. David, a quick last word. Yeah, the only inflation we've got to worry about is sticky inflation. And when you look at the wage data, I mean, this labor market is very tight, but workers still don't feel like they can get a wage increase. American businesses holding out again. giving them a wage increase. We just saw the second lowest year-over-year wage growth in five years. In that environment, we've got Teflon inflation. It won't stick. And if the inflation is sliding

over the course this year, the Fed may look at it right now and say, you know, let's put on sort of an orange light or an amber light. We've got a warning that we may raise rates. But ultimately, I don't think the economy is going to give them a reason to raise rates. Interesting. We're going to find out because a 43% chance for the CME FedWX tool, rate hike or two rate hikes at or by the December meeting. Kind of a big deal. We'll see what happens.

Much more dramatic meeting. Maybe we thought, thanks to everybody, they're going to let everybody go, right? Yeah, sounds good. Steve, thank you. Claudia Assam, David Kelly and Francis Donald. Really appreciate it. It's the beginning of a new era, and we're just minutes away from hearing from Kevin Warsh himself in his first press conference as a Fed chair.

A short statement from the new chairman, a unanimous decision to hold rates, and a missing dot on the plot. We're back after this. A quick check on the market reaction after the Fed's unanimous decision to keep rates steady. That was top of the hour. We had slight gains going into it. We have slight declines right now as we've backed off the session lows on the initial reaction to the projections and also to the statement. So the S&P right now is down about four-tenths of a percent.

Just a 38 point drop for the Dow. It could erase that. The rustles are already back in positive territory. And the 10-year is right around 445. On that note, here's how the bond market is reacting. Only a two-bases point move higher right now. In the tens, let's go back to the twos, which would show kind of that more near-term, what might the Fed do. That's still up about eight basis points to 413.

The dollar popped up to about 100 at last check, just a hair below that level. And gold also turned negative on the session today, and there it is dropping about three-quarters of a percent. Now we can turn to the messaging from the new Fed chair. Of course, following the decision at top of the hour, that's what investors are eagerly awaiting after that very short statement and the missing dot. Larry Adam, the chief investment officer at Raymond James and Brookings Senior Fellow David Wessel is back with us. Welcome to both of you. Larry, I'll start with you. What's your, forget if I didn't show you

the market reaction, what would your reaction be? I would say that this is why Kevin Morse didn't want to put this dot in, right? Look how quickly you've seen these changes. We came into this looking for probably a cut this, I mean a hike this year. Now we're talking about two hikes this year, right? So. But we came into the year looking for a cut. That's what I'm saying. People were hoping for a cut. Homebuyers were hoping for a rate cut. They're hoping for an under 6% mortgage. And what happened today, and not today, but with the inflation story is that, guess what, folks, mortgage rates aren't going down. If anything, they're probably going to go up.

Well, with your last speaker, David Kelly, I agree with him. You follow the energy markets. Think about this back in April. Energy prices dropped almost 90% year over year. As we sit here today, they're up 3.5% over where they were last year. So I think that inflation is going to start to come down, and that will be the catalyst. And that will cause a lot of these minds to change on the Fed. Because I do think the broader spectrum of inflation is on a disinflationary trend when you think a little bit broader.

David, what do you think of some of the theory and reaction we are getting is, oh, he wanted to come out guns blazing to the committee on inflation to kind of cement his kind of, I'm going to put inflation first. You can trust me. But then to Larry's point, if things look a little bit better in a meeting or two, maybe we can start to bring back and pivot back more towards rate cuts. The FMC is pretty evenly divided here. and what will determine is not Kevin Warren's charisma, but what happens to the economy. If inflation does come down, if the labor market softens,

then they won't raise rates. But it's hard to tell. One point I think you haven't talked about yet is the sentence where they're reaffirming the policy of maintaining ample reserves in the banking system. That is not consistent with we're going to rush to shrink the balance sheet. So it'll be really interesting to hear how Kevin Warsh talks about the balance sheet if he does in the press conference.

And just to explain this, we're looking at bonds, the hawkishness of the statement is kind of mitigated by the lack of hawkishness on the balance sheet. I don't think the statement is as hawkish as the dots. The dots and the forecasts of higher core inflation, that's the hawkish part. What Kevin Warsh is trying to do with this statement is not use the statement to give forward guidance. And I think he did a pretty good job of that. He doesn't say which way the balance of risks are. Yeah, but if the dots plot, he's stuck with the dots. Yeah, but if the dots are the summary of economic projections,

technically, if the dot plots don't align well with the statement, then the bond market's going to be confused, and what the bond market does not want to be is confused. Right. Well, I feel sorry for the bond market. They're going to be confused. What I want to see is, what does Kevin Warsh do about the dots when he gives to the press conference? Does he even talk about them?

And I think what we've seen so far has been an appetizer. I think the main event's going to be with the press conference. And I think you're going to be able to pick your poison, right? I think if you're a dove, he's probably going to talk about the fact that maybe we should look at other alternative metrics when it comes to inflation. I think he's going to talk about potentially AI and how longer term that's disinflationary. And as you said, though, the Hawks are going to talk about the fact that maybe he does want to reduce the balance sheet longer term.

So I think there's going to be a lot of things coming out during this upcoming press conference. Well, I do wonder if, you know, Jerome Powell was very good to take all of the reporter's questions. Maybe not everyone, but a lot of them. He would sit there and he would take questions from all the different news organizations. I wonder if this statement is some kind of a guy that maybe horse takes two questions and he's out. We don't know what to expect from this press conference. And now from this, I do wonder if it may be very good. He's going to say, I am not, Jerome Powell.

You have a lot of guts to predict something four minutes before it happens. That's what I've been told. I mean, I think the statement will be erased in the public and the market consciousness after the press conference. Because the press conference is what we're going to get a sense of what can. And what does the market want to hear, Larry? I think he'll leave them wanting more. I think that's part of this, right? You don't want that forward guidance to be locked down.

You want to leave some questions, let the market interpret it later on over time. Were you saying you don't think he wants, so let's say he's asked point blank, was your dot, the missing dot, was your projection, the missing one? And the reason why we're asking this, all the projections for inflation, they moved higher, but his might have been an outlier to the downside. You don't think he'd want to answer that question? I think he will answer that question, because that's one of his primary. things he does want to change some of the communication.

And by the way, he's not alone. I mean, even Fed Chairman Powell said, you know what? These are stale as soon as they're in paper. The question he won't answer is, if you had put in a dot, what would it have been? He won't answer that way. So he won't tip his hand if he himself is inclined one way or the other. No, I agree with that. And I do think, again, there's been plenty of people that have talked about this.

And I think that we're likely going to see. I think the question is that the Fed, is it what are you going to replace it with? That's the thing that they really have to come up with. And I think you'll see a bunch of subcommittees, you know, trying to figure this out over time. And I think still that we're not looking for any type of change in interest rates this year, which gives the Fed time. Four more meetings. Jackson Hole, that'll get plenty of time to start to communicate this with what's going on. Okay, so we've got two minutes to go.

But a lot of our audience probably screaming at the radio or the TV saying, darn it, I just want to know what the Mag 7 and SpaceX doing. You know, they're not moving a lot. So the stock market is not reacting super negatively to what was, by all accounts, slightly more hawkish meeting. Again, I think for the most part, the economy and the stock market has become less interest rate sensitive over time, particularly the MAG 7. Meaning Nvidia can still do fine, even if rates rise a bit. Yes.

And I think the bigger story is what's the economy doing? Because that's what drives our earnings over time. And we've talked about this, but you're talking about this upcoming earning season, another 20% plus earnings growth. Wow. I think that's going to be continuing to help this market. The market has some of these stocks have moved a little bit. David. Look, I think the market's moving on things that are independent of what Kevin Warsh had for breakfast.

Although it does see every time, you know, it's not uncommon to see a little bit of a move higher in interest rates, a little bit of a move lower in big tech stocks. Well, I mean, the market's been pretty abelient. It wouldn't be surprising if we have some bad days. But I think that Larry's point is right, that the stocks that are moving the market are less interest rate sensitive than, say, pulty homes. And one thing to add the mag seven or the big cat tech, cheapest evaluations that we've seen, in basically a decade. Wow, in a decade now. Plus 20% earn earn. More than a trillion companies. Yeah, and stocks have gone up. The projection is for them to keep going up because of 20% earnings growth, quarter over quarter for the next seven quarters. Yes. Does this Fed statement and tone change any of that thinking to you, Larry? It does not. Because I think that they are, this is a secular theme that's going on.

We're building out the next generation of technology. And whether or not these interest rates move up a quarter or a point, I have a point, that's not going to have a big impact on their businesses. Can we talk buzzwords, David? Are we at that point even? Do we have to just wait and hear at his first conference to know what buzzwords might be for the future, or is it going to be the usual things that hints of hawkishness are met with more selling pressure and vice versa? I think it's going to be interesting to see how he responds to the questions, as he said. Like, people are going to see what's the character this guy's Fed Chair. Doesn't matter so much what words, but how does he handle it? And I think we better stick around in case it's over in five minutes, but here comes

new Fed Chair, Kevin Warsh. Good day. It's an honor, a true honor to be back at the Federal Reserve and to take up this duty at a time of such consequence. I've been especially heartened by the warm welcome of old friends and new colleagues both. And I've listened closely to my fellow FMC members for a lot of new ideas, new thinking,

and genuine interest in moving the Fed forward. This week's FOMC meeting exemplified the very best of the Fed's traditions, rigorous debate, open-mindedness, commitment to mission, responsibility, and accountability for performance. In this business, they all add up to one thing, getting monetary policy right. or as near to it as we can do. That is our North Star. My colleagues and I are here to serve our legislative remit, which you've heard us say before, price stability and maximum employment.

And these objectives guided our business in the meeting just concluded. As you saw a few moments ago, the committee decided to maintain the target range for the Fed Fund's rate at 3.5 to 3 and 3 quarters percent in support of the Fed's dual mandate. The committee also reaffirmed its policy of maintaining ample reserves in the banking system. Economic activity is expanding at a solid pace, despite elevated uncertainty that owes in part

to the conflict in the Middle East. Productivity growth and capital investment, both strong. Job gains have kept pace with the workforce, and the unemployment rate has changed little. We recognize that inflation has been running well ahead of the Fed's long-stated inflation goal of 2%. That's been going on for more than five years. Persistently high prices are burden for the American people. But the recent past need not be prologue. I am pleased to report that members of the FOMC are unambiguous and unanimous. This committee will deliver price stability.

At any institution, a change in leadership is a natural and timely opportunity to reaffirm its mission, to review current practices, and to consider whether those practices best meet our objectives. My Fed colleagues and I will be working in close collaboration to ask what changes might improve the conduct of monetary policy. On that score, you might have already noticed something, a difference in today's policy statement. It's a bit shorter, a bit simpler, and it dispenses with some older language. That statement just gives you the facts as best we can judge it. Absin also is so-called forward guidance, which will be a bit more. we agreed was not well suited to the current policy conjuncture.

This afternoon, you also received the usual summary of economic projections. It's been the practice of this committee for participants to submit these projections, and I have encouraged my colleagues to continue to do so. I, however, have refrained from offering any projections of my own, consistent with my long-held views on the SECP, at least as currently structured. In the median projections, real GDP rises at 2.2% this year, 2.3% next year, and total PC inflation runs at 3.6% this year, 2.3% next year. The unemployment rate stands at about 4.3%. The median participant judges that the appropriate federal funds rate to be at 3.8% at the end of this year, and 3.6 at the end of next. Let me turn now to a few words on a key initiative that we're announcing today. I'm appointing a task force in each of five areas that are central to the broad conduct of monetary policy.

First, Fed Communications. Second, the Fed's balance sheet. Third, our use and reliance on existing data sources. Fourth, productivity and jobs in an era of. transformation. And last, the Fed's inflation frameworks. These subjects are timely, consequential, and in my view worthy of a fresh look. My colleagues and I discussed them with energy and purpose over the last couple of days. For each of these independent task forces, I'm enlisting some of the very best minds, both inside and outside economics profession. They will be supported by

subject matter specialists from our superb Fed staff. And they'll have a straightforward charge. Start with first principles. Ask hard questions. Examine current practice. Consider alternatives. And ultimately propose next steps for policymaker consideration. Since last summer, my colleagues discuss possible improvements in the form and function of Fed communications. This new task force, will build on that effort, and I expect propose some well-considered changes, including to the SEP I mentioned a few moments ago. The second task force, the one on balance sheet policy, will review the benefits and risks of the current ample reserves regime and the composition of the Fed's balance sheet. They will assess alternative frameworks for the conduct and operation

of monetary policy. The third task force, the one on data, will evaluate new information sources and consider methodological changes to improve data gathering with the aim of giving policymakers more accurate,

relevant, contemporaneous, and perhaps most important, actionable information on the state of our economy. Fourth, the task force on productivity and jobs. It will survey the pace, the reach, the economic impact of new general purpose technologies, including AI,

and explore the implications for the Fed in pursuit of our employment and inflation mandates. The last task force, the one on inflation frameworks. That'll examine the drivers of inflation, first principles, and weigh the full range of ideas for delivering price stability in a changing economy. You'll hear quite a bit more about these task forces and this overall initiative in the coming weeks. Enough for now to make a simple statement. Each task force will serve an objected shared by everyone in the system, shared by everyone around that table that I sat with over the last couple of days.

A Federal Reserve that is clear-eyed about its mission, fit for purpose, and focused on the future. And with that, I appreciate your attention. I'm happy to take your questions. Hi, Chairman Howard Schneier with Ruters. Good to see you again and welcome back. This is a lot to be putting in motion so fast. What is the timeline you have in mind for each of these? So I think it will depend on the task force.

It also depends on the urgency in which we need clear answers. My expectation, I'm still in the business of recruiting and finalizing them, My expectation is the task forces will begin work in the next couple of weeks, and we'll start to get some more information from them, some more framing of how they see things starting in the fall end, hopefully most, if not all of them, concluding by year end. And just specifically on the inflation framework, you talk about first principles. Does this include a review of the 2% target itself? You've mentioned that things to the rate of the decimal point don't matter. Should this be starting from a premise that 2% as a point estimate is too strict? Let me break that into two pieces. First, on the inflation framework review, their remit is what are the drivers of inflation? What's the Fed's responsibility for inflation?

In part, how do we measure inflation, but that will overlap with my data group. On the 2% inflation objective, that is the Federal Reserve's long-held objective of 2%. You've heard me say before, I tend to focus on the left of the decimal point. Well, the 2 is the left of the decimal point. For now, zero is to the right. I see no reason until we have reestablished our commitment and ability to deliver on the 2% inflation objective to revisit that. So that will be outside the scope of what we're taking on. Thank you so much, Colby Swift, in the New York Times. You've in the past said that inflation is a choice, and in the policy statement, it includes this pledge to deliver.

of our price stability, as you've reiterated today. But looking at the SEC, the bulk of your colleagues expect Core PCE to run around 3.3% by year end, and for the 2% inflation target not to be reached until 2028. So I'm curious how patient you think the Fed can afford to be at this juncture in terms of waiting for one-time inflation waves to wash through and for underlying inflation to step down after so many years of inflation running above target. and under what circumstances you would support the Fed taking some action and raising rates? Sure.

So quite a bit there. Let me try to break that into pieces. First, we have the capability and commitment to deliver on our price stability objective of 2%. That's exactly what we're going to do. In the Fed's review of its strategy over the last any number of years in January, the Fed, including the strategy that we're still bound by, the Fed statement says that inflation is primarily determined by monetary policy. You bet it is. I've said for years, inflation is a choice.

You bet it is. And today I'm announcing that this committee, unambiguously and unanimously, have decided we are going to deliver on that. The rest of your questions sounded like an encouragement for me to give forward guidance. We've dropped forward guidance. Some along the committee, I think, dropped it. I suspect from our discussion the last couple of days, because they said at this moment in time, it doesn't feel as though providing forward guidance is right. Others have, I'd say, different views and think as a general proposition, forward guidance isn't the business we should be in.

But that will be taken up by the task force on communications. And my policymaker colleagues, we're going to listen hard to what the experts say and make our own decision. But I can't give any forward guidance about what we're going to do next. The good news is we'll be meeting in six weeks. So just following up, I guess, on the current policy settings, then I am curious how restrictive you think things are at the current moment, given the flow of data that we've seen and forecasts that are coming down the pipeline. I've heard characterizations, both inside and the Fed, about that. I'll give you my own.

It's uneven. If I look at the housing markets as one example, Fed policy isn't the same. single determinant of the state of the housing market. But broadly, I would say there, Fed policy appears to be somewhat restrictive. I would have a hard time managing to say those words if I were to see what's happening in financial markets. So I'd say it's uneven. That's perhaps a function of different transmission mechanisms of monetary policy, whether monetary policy is coming from our interest-grade tool or our balance sheet tool. But the good news, we have a task force on that, too, and the balance sheet task course will be looking more at that subject.

You've said you don't like forward guidance. You dropped it from the statement this time, but with the dot plot, nine members suggested that they want a rate increase by the end of the year, and the markets have taken that as forward guidance. So what does this mean in terms of how you guide the markets and in terms of what the dot plot's future is? I'm going to have to give you the same answer I gave to Ms. Smith. We've got a task force for that. I'll give you a little bit more. I reviewed the dot plots, and when I saw the submissions,

I noted that all the submissions were coming in with pencils, you know, those kinds with the big erasers. That's to say that I think my colleagues around the table, when they submitted their dots, understand the world is changing quite quickly. and they didn't feel bound by them six weeks from now or six days from now in the event that their circumstances change. I'll note a couple other things. What I heard around the table was, as they submitted their modal forecasts, their modal forecasts, to be clear, this was more likely than not.

This was more likely than their other scenarios. So I didn't hear tons of conviction. What I heard was the kind of humility that I think we should. should have. I did not submit a dot. For me, it's not helpful in the conduct of policy. I suspect by year-end, as I mentioned in my opening statements, there'll be a review about communications broadly, press conferences, dots, meetings and the like, transcripts, minutes. This will be part of that. I don't want to prejudge the outcomes there, but I'm pretty open-minded about what they could be, and I was just incredibly impressed over the last couple of days.

My colleagues over the last two days and frankly the first three weeks I've been here, they've been very open about changes. Changes isn't easy, changes filled with risk, but our number one goal is to get monetary policy right. The way to get monetary policy right is to deliver on the remit that Congress gave us, to deliver on price stability, and there was no disagreement on any of those points. At the risk of possibly getting the same answer about task forces.

Communications, what is your feeling about these news conferences? Are you going to continue one after every meeting? Do you find them useful? What is the future for the way Kevin Warsh will communicate? Well, this one's probably got another 15 or 20 minutes in it, so I don't want to prejudge the outcome. Press conferences can be a very useful way to communicate. with households, businesses, and more broadly, through using the likes of you.

I had a great old mentor named George Schultz, and his mantra was press conference are useful. But when you have one, you want to make sure you have something important to say. Today, I think we had something important to say about our commitment to deliver on price stability, our commitment to rethink practices with an eye of moving the Fed forward, and to give you and the American people a sense that these aren't idle thoughts, these are concrete thoughts, that we're going to seek out the best minds, both the best thinking inside of the Federal Reserve, and the best people I know in business and economics and the academy and technology and the rest

to share their views. That's what we're going to be doing here, the pursuit of truth. I think we're going to come up with some new and interesting things. We made some changes today. I expect more changes to come. And some of those might well be worthy of a press conference. Chris, Ruegaver, at Assessated Press, thanks for taking our questions. Could you give us a sense of how you see inflation more in the long term?

I know you may not want to comment on the ups and downs, but is this mainly driven by energy prices in the Iran war at this point, or do you have any concerns about underlying inflation pressures in the economy? Thank you. So I can't do much better than the committee just did, so let me restate it. inflation remains elevated relative to the committee's 2% goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy. The paragraph goes on to say, but to be clear, the Fed will deliver price stability. My own judgment is the committee spent quite a bit of time, not just in two days, but over iterations of a couple of weeks. That's what we're prepared to say about inflation, but the commitment to deliver is strong,

unanimous, and unambiguous. And that's, I think, an important message. We've missed for five years, and we're going to fix that. Well, great. And then just on your, the data task force and everything else, I mean, generally speaking, I think people feel the Fed looks at everything already. Certainly, that was the sense from before. What's, is there data that you feel is not giving?

enough weight. I mean, you mentioned the trim the mean in the past, but again, that's well known to certainly most Fed members. So what is that task force looking at and what might be the, I mean, I know you don't want to prejudge the outcome, but are there examples of data that you expect might be given more weight? Thank you. So you're answering my question. So let me say I don't want to prejudge the outcome. I also don't want to say too much about what they're going to do because I still have a phone call or two to make before I've nailed down the people that are doing that. I'm interested in. one of the outside experts view is on the subject. I'll say this generally. Most of the data that central bankers and other government officials in the United States consume come with old-fashioned survey methods, a national accounts of what the U.S. economy looks like that looks very little like the U.S. economy in 2026. Survey methods that don't have response rates that we need asking questions that might have been quite applicable a generation ago that are less applicable now. So even inside of official statistics, I would be open-minded if the task force and our own best thinking had recommendations how those official statistics can be brought up to a standard of our time using new analytic methods.

And also say this, almost every private company CEO that's running his or her business are doing so with real-time information. information. That isn't subject to much revision. That is telling them what just happened at that very moment. As you know, there are normal, long and variable lags in the conduct of monetary policy. What we're really interested in is what's happening right now. What we're less interested in is echoes of history. And you're hearing from my answer that some of the data that we receive, that we're waiting on the first Friday after the month, the payroll index or something else, That might be an echo of history that's quite useful on its third revision. We need to take those error bounds down because we have to make hard decisions in real time.

I'm really open-minded that there is a lot of new data sources that we can learn from the private sector, from reforms in the official sector, and new analytic techniques that are far more refined than asking a simple question about whether something was core or non-core. Thanks. Welcome, Mr. Chairman. Edd Lawrence with Fox Business. So if you don't give a lot of ongoing forward guidance, won't the markets have more volatility and shouldn't Americans have more access into what you're thinking going forward?

So I think financial markets perform best when they react to incoming data. I think the financial markets work less efficiently when they ask a question, how will the Federal Reserve react to that income? coming information. The more that markets are paying attention to what's happening in the real economy, deciding what's good data and what's less good data, the more financial markets can price what they believe is the most likely, and what are the tail risks? Financial market prices

are probably the most important source of information to guide central bankers. But when all the financial markets are doing is reflecting back what we've said, then we're taking the most important source of information, and we're being blind to it. I'd like us to create a system where those blinders come off, where markets are following data that they efficiently think is reliable, and they'll be watching data, will be watching data, they'll come with better information through market prices to us, we can make more informed decisions. But ultimately, the goal that I said at the outside, deliver on the price stability objective. that Congress told us to do

and that we've got to get in the business of doing. If I could take you in the meeting a little bit, to your first meeting, the board members seem fairly hawkish when you listen to, in general, when you listen to what they're saying. Was there any discussion of a rate cut going forward today? There was one proposal on the table.

There was no discussion of any other proposals. The discussion on that proposal, I would say, was quite limited. The group was unanimous. ambiguous on it. It has been the practice of this central bank and others to have a range of alternatives. Today we had one. I thought it furthered discussion, deepened it, and made it clear what we needed to do and how we need to deliver. I wouldn't prejudge what happens in the future, but there was only one big subject for us. We took it on. We had a good family fight on it for a

couple of days and we ended up, I think, in a better place. Thanks a lot, Claire Jones, Financial Times. You know, coming to this blind reading this very nice short statement that I think we've all appreciated in the room, one might wonder why you didn't raise rates today considering what you're saying here about the risks to U.S. inflation and your mandate. I guess why not and what would you need to see in order to get to that place? And secondly, on your task forces, are there any best practices at the central banks that you'd consider looking at?

Thank you. I'm glad they're in the practice of giving you two questions because my answer to your first question was to be very curt. I've got nothing more to say than the statement itself. And to the point of the question I got before, market reactions to what we say unfiltered, I think is more helpful than having delivered a statement, me than improvising further upon it.

Best practices of task forces. This is a subject I've thought some about. I've been on a task force or two in my life. Best practice. Find the best minds. Ensure that the task forces have a range of people both by backgrounds and predispositions. So they too can have a bit of a family fight.

make sure when you establish a task force that the group that's going to be the recipient of the information feels they've got some equities in it too that's why we're looking for haven't done the final roll call some of the most significant talent we have in the building and across the reserve banks on each of these and in some sense second second them to this group for a period of some number of months

so that the leaders of the task force know what the most analytical central bank in the world thinks about that. They can reflect on it. And a final best practice, we're not outsourcing decisions to anybody. Administrations passed and present, reserve banks have chosen a group of 19 people around the table. These will be our decisions. We can agree to some of the recommendations,

disagree with others, have a good family fight about it. But what comes from them will, I hope and believe, make the discussion we have internally better, stronger, more of a dialectic so that we can finally deliver on that price stability objective. Just a quick follow-up on your market's point. If you look at two-year yields, they're really suggesting that markets think more tightening is needed. Would that be your read on what the two-year yield is saying as well? We were in such a good place. This is why we don't do third questions, I presume. I'm not going to offer any commentary on market reaction over the last

30 or 60 minutes. What we've given markets is a new chapter for the central bank, some fresh thinking. What we've given markets and households and businesses, I think, is a commitment to ask ourselves hard questions such that we can deliver on the promises that we've made before. This is a lot of change for financial markets to digest. I wouldn't be particularly intrigued by how they react in the first several minutes or even for several days. What I think is most important is that financial markets, and at least as important, households and businesses know that this central bank will deliver unprice stability. Hi, the chairman of worship. Brian Chung with NBC News, thank you for taking our questions. So when you say that we've dropped forward guidance for

the layperson, that might sound like the Fed's going to say less or offer less insight into where their borrowing costs might go. So for the person that maybe you might run into at the grocery where the price tags are rising at a faster pace than their wages at the moment. How would you explain it to them? I don't know if task force might be the answer there, but how would you kind of communicate this era, this chapter of the Fed? If I told somebody in the milk aisle that I had a task force for that, I think that would be doing a very poor job, so I appreciate it. If I saw somebody in the grocery store, what I would say to them

is that we cannot have a very significant effect on particular prices. the price of oil in the markets today or even the price of a dozen eggs, that does not have first order consequences to what we're doing. But we do have a really important job there. And it's to make sure that those changes in oil or beef or eggs or milk don't broaden in the economy, don't have second and third order effects. That's our job. That's our commitment. That's our capability. And we're going to deliver on it. And then is the Fed's relationship with the Treasury also under review there was the normal breakfast meetings with the Treasury Secretary? Is that something you intend to continue doing?

And have you had conversations with the President since you're swearing it? So on the President, I don't have anything for you. With respect to the Treasury Secretary, he has been posting pictures of our breakfast. So I don't think I can deny that. The long tradition at the Central Bank is that the Fed Chairman and the Treasury Secretary meet weak. I think we've pulled off three of those so far. I believe he's oversees this week, so this will be the exception of the rule. I think they're very useful discussions.

The central banks' objectives and our roles in responsibilities are quite delineated from the fiscal authorities. And in my view, monetary policy is independent in the conduct of what we do. But that doesn't mean we're not interested in what's happening with the fiscal authorities. The way I think about it is this central bank needs to have a wide lens, but a narrow remit. We need to be quite interested in what's happening in the world. I won't be breaking any news here to suggest I'm quite interested what's happening in the Middle East. That does have some effect on our day job. It doesn't mean it's our responsibility, but I think we're going to keep a wide lens,

and my meetings with Secretary Besson to this point have helped widen that aperture. So we're aware of things that could affect our day job even if it isn't. Steve. Steve Leasman, CNBC, Mr. Chair, thank you. Mr. Chairman, thank you for taking my question. You had said before you became chairman that you thought productivity was a reason why the Federal Reserve could lower interest rates. Do you still believe that to be the case? So the committee had a discussion of productivity today, AI,

I came up. The way I thought about it before and socialized with the group is that artificial intelligence, the latest generation of general purpose technology, is perhaps as important change in the economy and business and households that we've had in my adult lifetime. It is filled with both a huge opportunity and with risks. I take both of those very seriously.

You may have heard me say before that AI is shorthand preps for American ingenuity. That doesn't mean that it's going to be easy. That certainly doesn't mean it's not going to be disruptive. But over the long term, my conviction, and I heard quite a bit of support for this around the committee today, is the United States is a winner as we go down this. The United States is ultimately going to be better off in that. Now, to bring that back to the conduct of policy, timing, scale, speed, implications for output and employment. It's one of the things we have a task course to do.