U.S. markets are shuttered today for Juneteenth — the first federal holiday since the most consequential FOMC meeting of 2026. If you missed Wednesday’s fireworks while prepping for the long weekend, here’s the story that matters: the Federal Reserve just retired its cutting bias, and markets are still processing what comes next.
Warsh’s debut: shorter, sharper, hawkish
New Fed Chair Kevin Warsh presided over his first meeting on Wednesday, and he wasted no time making his mark. The post-meeting statement was slashed from 341 words to 130. Gone was every hint of future easing. The FOMC voted unanimously to hold rates at 3.50%–3.75%, but the real story was buried in the projections.
The dot plot — even without Warsh’s own submission (he called the tool “not helpful in the conduct of policy”) — flashed red. The median year-end rate forecast jumped to 3.8%, up from 3.4% in March. Nine of eighteen participants now expect at least one rate hike in 2026. Futures markets promptly priced in a 77% probability of a hike by December, according to CME FedWatch.
Warsh didn’t mince words on inflation: “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.” Inflation has now run above the 2% target for half a decade. The Committee’s own forecasts reflect the urgency — headline PCE was revised to 3.6% for 2026, up sharply from 2.7% in March (CNBC, Reuters).
Labor market: stable, with soft spots
Thursday’s jobless claims offered a mixed read. Initial claims fell 4,000 to 226,000 — roughly in line with expectations — but continuing claims ticked up to 1.810 million. The median duration of unemployment hit 11.6 weeks, the longest stretch since November 2021 (DOL). Warsh dismissed concerns, calling the labor market “stable.” Most economists agree layoffs remain low, even as hiring has cooled.
But the Philadelphia Fed’s June manufacturing survey added a worrying inflation footnote. Prices paid by factories jumped, and expected prices received reached levels not seen since summer 2021. Stephen Stanley of Santander U.S. Capital Markets called it “a troubling picture for the Fed” — if the measure rises two more points, it would be the highest reading since the early 1980s.
The ceasefire wildcard
A U.S.-Iran ceasefire agreement was signed this week, pushing oil prices lower. That’s unambiguously good news for consumers and energy-dependent sectors, but economists warn the disinflationary relief won’t be immediate. Supply-chain distortions from months of Middle East conflict have been baked into pricing across industries — unwinding them will take quarters, not weeks.
What to watch next week
Markets reopen Monday, and the calendar gets busy fast. Thursday brings the PCE price index for May — the Fed’s preferred inflation gauge — alongside durable goods orders and the final Q1 GDP revision. After this week’s hawkish pivot, a hot PCE print would cement the case for a rate hike by fall. A cooler number would give the lone “one cut” dot at the Fed something to work with. Either way, the era of “higher for longer” just got a meaningful upgrade.
- Thursday, June 25: PCE inflation (May), durable goods orders, final Q1 GDP
- Friday, June 26: Consumer sentiment (final, University of Michigan)
Markets will be closed Monday, June 22 for the Juneteenth observed holiday.