US Fed Meeting 2026 Highlights: Kevin Warsh holds rates at 3.5%-3.75%; Three policymakers dissent in favour of a hike

The US dollar strengthened on Thursday after the Federal Reserve left interest rates unchanged and fresh US airstrikes in Iran increased demand for safe-haven assets. The greenback gained against most major currencies, with the euro slipping to $1.1458 and the dollar index edging up 0.1% to 100.93. Investors also awaited the Bank of England's policy decision, while markets continued to assess the Fed's rate outlook amid divisions among policymakers.

The Nasdaq Composite is on the verge of entering correction territory after a sharp selloff following the US Federal Reserve's latest policy decision, according to a Reuters market analysis. The index has fallen 9.78% from its June 2 record closing high, slipping below its closely watched 100-day moving average—a key technical support level. Analysts say the breakdown could leave the tech-heavy index vulnerable to further losses if selling pressure persists.

Responding to CNBC's question after taking charge at his second press conference as the Fed chair, Kevin Warsh shared how he interprets the stock market.

"Interpreting markets is an imperfect business. We can think these things are over-determined...Even though we have not done much in 42 days the markets have done quite a bit," he said.

Within hours of the press conference, analysts at JPMorgan Chase & Co began doubting Warsh's commitment to curb inflation.

As quoted by Bloomberg, JPMorgan’s Michael Feroli wrote, "He once again failed to specify how he intended to achieve his stridently asserted inflation resolve. We believe this will add some urgency for the rest of the committee to act on its mandate.”

Similarly, Stephanie Roth, chief economist at Wolfe Research, said, “The press conference damaged his credibility to some extent. His communications style appears to be backfiring and the market is calling his bluff," according to Bloomberg.

Read the full text:

"Good day. My second FOMC Committee meeting as Chairman has come quickly. It’s probably too early to call it a streak, but our discussions again were collegial and constructive. I am truly lucky to work with colleagues so capable and missionfocused, and so determined, like I am, to sharpen the performance of the Federal Reserve. Today, as you know, our Committee decided to vote by a 9 to 3 vote to maintain the target range for the federal funds rate at 3-1/2 to 3-3/4 percent. The Committee is continuing its policy of making ample reserves in the banking system. The economy is showing impressive resilience. Even with recent shocks, the trends are positive and reveal solid growth. Job gains have kept pace with the workforce, and the unemployment rate has changed little. Inflation remains elevated relative to the Committee’s 2 percent goal. The Committee remains resolute. You’ve heard this before, but we will deliver price stability.

As before, the policy statement conveys just the facts. It’s steering clear of forecasting, a choice we consider especially prudent at these uncertain times. Uncertainty, however, does not mean a lack of clarity. For some households, businesses, and market professionals, five years of high inflation have left a mistaken impression that is hard to shake: that the Fed’s implicit inflation target was somehow above 2 percent. Let me reiterate: There is no soft inflation target, there is no soft implicit target —not on this Committee’s watch. There is only a target, and it is 2 percent. Not one of my FOMC colleagues is under any illusion. We have begun a new chapter, and we understand that the five-plus years of inflation above target cannot be cured in nine weeks—or by a single month of modest price decreases.

This Fed will not waver. Our credibility rests on performing our duties, and delivering on our responsibilities. Americans are right to expect that, because our nation’s prosperity depends on it. To the regulars here in the press room, today’s assessment might sound familiar. Yet there was nothing inertial about our discussions, our policy, or our strategy. Two economic developments are worth highlighting. The first is a very notable change since our last meeting 42 days ago: nominal and real yields are materially higher across the Treasury curve. In fact, some of the increases in market interest rates between FOMC meetings are among the most significant in the last two decades, ranking around the top decile or so.

But if the Committee didn’t change its policy rate, what happened? In the inter-meeting period, market attention centered on real data and real economic developments. Prices reacted in real time to incoming information, and the reduction in forward guidance may have been a factor. Market participants are learning to play the ball, not the referee—and market prices will continue to respond in the direction and magnitude they see fit. This is, in my view, a change for the better—and we are just getting started. After all, the central bank need not always and everywhere be the center of attention. I understand the desire for rolling forecasts and commentary from this Committee. But for our part, we need to observe market reaction to developments, direct and unfiltered. I want to stress, of course, that decisions by this Committee matter a great deal. And where necessary and appropriate, we will not hesitate to act.

A second economic development is one that I noted at the congressional oversight hearings this month, but it’s worth repeating. The most striking feature of the economy is the strong growth of business investment. The surge in high-tech capex has been remarkable. But that does not necessarily make the Fed’s role any easier. In the A.I.-related category of high-tech equipment and software, the most recent data shows four-quarter growth rates of nearly 20 percent. This is helping to sustain the healthy momentum of manufacturing output. More generally, capex is preparing the ground for future growth. Nonetheless, the precise timing and magnitude of effects on the supply side remain hard to predict.

FOMC meetings produce policy decisions. But just as important is candid discussion of the big things that matter most. That too is a priority in this new chapter at the Fed. In our meeting, vigorous discussion centered on four questions, which I will enumerate. First, we talked a lot about the implications of the past five years of high inflation on the current policy conjuncture. To echo an old phrase, has the past really passed? Second, my colleagues and I considered the economic shocks of recent years. Strained supply chains arising from the pandemic, military conflicts, energy-supply disruptions, substantial increases in tariff rates, and yes, the surge in A.I.-related investment. These differ in their sources—do they also differ in their effects on output and employment?

Third, we took up the related question of price increases arising from shocks. The business capex boom, for example, is driving up prices of memory and logic chips and associated A.I. infrastructure. Do those changes indicate a broader inflationary dynamic, or do we just focus on them just because they are under the bright streetlight? Finally, we discussed monetary policy tools and strategies for achieving stable prices. If, as the Fed has long held, interest rate policy should be its primary monetary policy instrument, how much accommodation are we getting from the balance sheet? In all of this, our work is advancing at the Fed. We are asking the right questions. And in this consequential time, we know how very much depends on getting the right answers. Of course, you’ve all arrived with questions of your own, so let’s turn to them now. "

Reacting to the decision to keep interest rates steady, Donald Trump didn't blame Warsh - whom he nominated - while speaking to reporters Wednesday.

“I know he’d love to see lower interest rates, but he’s got a board, and it’s a political board, and they want to keep rates up,” the US president said.

As Fed chief Kevin Warsh vowed to commit to bring inflation down on Wednesday, a divided Federal Reserve still left interest rates unchanged.

Warsh for the first time nodded openly to the idea that "any central banker" faced with a steady job market and rising underlying inflation would be "more inclined to tighten policy."

"We are on the job, we will deliver, we are focused like ​a laser on making sure we can do it, but the suggestion that we're going to be able to do it with our magic wand is one I ⁠want to disabuse you and everyone else of," Warsh told reporters after a two-day policy meeting. "If inflation continues to be elevated through the forecast period, interest rates could well be part of that solution, but I wouldn't say it's ​in isolation."

US government borrowing costs jumped sharply on Wednesday after the Federal Reserve left interest rates unchanged, as investors grew increasingly concerned about the outlook for inflation under the new Fed leadership.

The yield on the 30-year US Treasury bond rose 11 basis points to 5.22%, its biggest single-day gain in more than a year and the highest level seen since 2007. The move signals that investors are demanding higher returns to hold long-term US government debt, reflecting uncertainty over the Fed's ability to keep inflation in check.

Reaffirming the Fed's commitment to its inflation mandate, he said there was "no soft inflation target" or "soft implicit target," adding that "there's only a target and it's 2%." He acknowledged that more than five years of inflation above target "cannot be cured in nine weeks, or by a single month of modest price decreases," and stressed that "this Fed will not waver."

During his first press conference last month, Federal Reserve Chair Kevin Warsh announced five task forces to review key areas of the central bank's policymaking.

The panels will examine the Fed's approach to inflation, communications, economic data, productivity and the labor market, as well as the central bank's balance sheet, which Warsh has long argued is too large.

Earlier this month, the Fed appointed 15 leaders for the groups, including Harvard economist Raj Chetty, tech investor Marc Andreessen, and former central bank governors of Brazil, England and India.

The Fed said the task forces will use central bank staff but "will operate independently," marking a departure from previous policy reviews that relied primarily on internal analysis. Warsh has said he expects the groups to deliver recommendations by the end of the year.

Federal Reserve Chair Kevin Warsh said he plans to "check in" with the task forces he established last month before attending the Fed's annual research conference in Jackson Hole, Wyoming.

"In the next couple of weeks, I'm going to be doing a check back in. I've given them time to sort of think hard about their agenda, their debate, their schedule, and when they might be ready for prime time. I'll do a little bit of that checking and, that may or may not inform anything I have to say in Jackson (Hole)," Warsh said.

Asked about his speech at the conference, Warsh said he has not yet begun preparing his remarks.

Federal Reserve Chair Kevin Warsh rejected the idea that the Fed had "paused" its rate policy, describing the latest decision as a thorough reassessment of the economic outlook.

“I wouldn’t characterise what we did as anything like a pause. I would characterise what we did as a rigorous review of the economic situation,” Warsh said.

“I would characterise what we did as a review of the big hard questions, and I’d characterise it as a view of what our own homework is to try to resolve those questions in the period ahead.”

Warsh added that while the Fed left interest rates unchanged, the decision marks "the beginning of a story, not the end," signaling that policymakers will continue evaluating incoming data before their next meeting.

Federal Reserve Chair Kevin Warsh said the Fed is focused on understanding how economic shocks influence underlying inflation dynamics rather than dismissing them as temporary.

"We take these shocks seriously. There have been a series of them that have been hitting this economy. We're not looking through them and saying, 'Oh, they don't matter.' But we're trying to understand ... to what extent are these shocks broadening in their effects, broadening in their impact on prices that are quite far removed from it?"

Warsh added that the shocks "make this job and this policy conjuncture a little tougher."

His comments came after U.S. price pressures eased last month, largely due to a 5.7% decline in energy prices following a memorandum of understanding between the U.S. and Iran to end the war. Fed officials, however, have cautioned that June's CPI data may not fully reflect the recent escalation in Middle East hostilities.

Federal Reserve Chair Kevin Warsh said the central bank will continue to closely monitor financial markets as it prepares for its next policy meeting.

"Markets are reacting in real time. In the period ahead, we've got important decisions to make about the policy rate. Markets in the intervening period, I think, have quite a bit of decisions to make," Warsh said.

"We'll be continuing to watch that market information, see how it responds to incoming events. And that can help inform our decision making when we meet in seven or eight weeks."

About the three dissenting votes, Federal Reserve Chair Kevin Warsh said he welcomed the debate, describing it as the "good family fight" he had hoped for.

"That's the purpose ... I come into this meeting, even this press conference, heartened by what I've experienced the last two days. Most of our discussion were on the big questions that matter to the conduct of monetary policy," Warsh said, adding that "it was a real family fight."

"It was an active, robust discussion about what's in the full range of what we can do and might want to do in the period ahead."

Warsh noted that even before becoming Fed chair, he believed "messier" meetings, where policymakers openly debated their differences, would lead to better monetary policy outcomes.

When asked what message he is taking from financial markets, Federal Reserve Chair Kevin Warsh said the central bank is trying to observe market signals without influencing them.

"What I've really been trying to do ... is getting an unfiltered message from markets, getting a direct message, letting buyers and sellers meet at prices for Treasuries, for the foreign exchange value of the dollar," Warsh said.

"We're trying not to interfere with that market signal. That's part of the reason why we've been somewhat spare, in our words, when we pulled back from forward guidance. So they're reacting to events, I would say much more directly, over the 42 days since we last met. This is a good thing."

Warsh added that interpreting markets is "an imperfect business." Before the Fed's rate decision, markets had priced a 65% chance of rates remaining unchanged and a 35% chance of a hike, reflecting one of the highest levels of uncertainty around a Fed decision in years.

Federal Reserve Chair Kevin Warsh said the Fed stands ready to act if inflation remains persistent, even after leaving interest rates unchanged.

He reiterated that the central bank will not provide forward guidance on the path of interest rates, saying policymakers need to observe market reactions "direct and unfiltered." Warsh added that the Fed "will not hesitate to act" when necessary and appropriate.

Federal Reserve Chair Kevin Warsh said the US economy continues to show "impressive resilience" while reiterating that the central bank remains firmly committed to bringing inflation back to its 2% target.

"You've heard this before, but we will deliver price stability," Warsh said, adding that the Fed has no soft inflation target and "will not waver" in its commitment, even after more than five years of inflation running above goal.

Before taking questions, Federal Reserve Chair Kevin Warsh outlined the key topics discussed during the Federal Open Market Committee meeting, saying policymakers held a "vigorous discussion" centered on four questions.

Warsh said officials examined whether the effects of the past five years of elevated inflation continue to shape the current policy outlook, the impact of recent economic shocks including supply chain disruptions, geopolitical conflicts, tariffs and AI-related investment, as well as price increases stemming from such shocks and the effectiveness of the Fed's monetary policy tools and strategy.

Federal Reserve Chair Kevin Warsh opened his press conference by reaffirming his push to eliminate forward guidance, saying the Fed's policy statement "conveys just the facts" and avoids forecasting future actions amid ongoing uncertainty.

Warsh also explained the central bank's commitment to its 2% inflation target. "There is no soft inflation target. There is no soft implicit target. There's only a target and it's 2%," he said, adding that while inflation has remained above target for more than five years, the Fed "will not waver" in its commitment to restoring price stability.

Kevin Warsh begins press conference after the release of policy statement

Fed Chair Kevin Warsh has continued his preference for shorter policy statements. After the June meeting, he said the streamlined format was intentional and reflected his view that the central bank should communicate only when it has something meaningful to say.

The Federal Reserve's post-meeting statement was largely unchanged from June, with the only notable revisions being the inclusion of dissenting votes and a minor wording change. The statement replaced "reaffirmed" with "is continuing" in describing the Fed's policy of maintaining ample reserves in the banking system.

Dissenting votes have become more frequent at the Federal Reserve in recent years as policymakers face increasingly difficult trade-offs between controlling inflation and supporting maximum employment.

While the committee opted to hold rates, Beth Hammack, Neel Kashkari, and Lorie Logan voted in favor of an immediate 25-basis-point increase, highlighting continued divisions over the inflation outlook.

Alongside its rate decision, the Federal Reserve said it will continue its policy of maintaining ample reserves in the banking system to support market functioning.

The policy statement repeated the central bank's commitment to restoring price stability, stating simply: "The Committee will deliver price stability."

Policymakers said uncertainty remains elevated, partly because of the ongoing conflict in the Middle East, which has contributed to inflationary pressures through higher energy costs.

The Fed acknowledged that inflation remains above its 2% target, citing supply shocks that have pushed up prices in sectors such as energy.

The Federal Reserve said job gains have kept pace with workforce growth, while the unemployment rate has changed little, suggesting the labour market remains stable.