New Fed Same As the Old Fed

Data since the Federal Reserve last met has been largely positive on economic growth and expectedly warm on inflation.

The FOMC held interest rates unchanged at a range of 3.50-3.75% in Kevin Warsh’s first meeting at the helm
Even if Warsh wanted to cut, his freedom is constrained by recent energy-led toasty inflation prints
At first, Warsh’s changes are more tinkering around the edges, for example focusing on trimmed mean inflation
Half of FOMC participants anticipating a hike this year; appears that Warsh did not submit a dot plot projection

The last time Kevin Warsh joined an FOMC meeting, Lady Gaga’s “Born this Way” was on top of the Billboard charts. Said another way, it’s been a while. Warsh re-joined the Fed about four weeks ago, which makes this June FOMC meeting his first time in charge. At Warsh’s first meeting in the big seat, the FOMC elected to hold interest rates unchanged in a range of 3.50 – 3.75%, where they have been all year. Realistically, Warsh does not have much freedom when it comes to rate setting at this moment, but he does hold considerable sway as to how the Fed’s rate setting group frames its views on core inflation and productivity growth as the year progresses.

Data since the Federal Reserve last met has been largely positive on economic growth and expectedly warm on inflation. With May’s numbers, the 3-month average growth in payrolls accelerated to +188K. Contrast this figure to the -40K average in the final months of 2025. Put simply, the period of labor market fragility brought about by tariffs, supposed federal job cuts, and emigration policy is now behind us. The Iran conflict opened up another avenue of risk for the labor markets—energy shocks are usually anti-growth—but the strength of job gains in the face of these risks just serves to underscore the resilience of labor demand. When it comes to inflation data, there’s obvious heat from higher energy costs on the headline CPI/PCE. How much of this gets passed through into core inflation is an open question. Realistically, we will not see clean data until July CPI gets released in August. In the meantime, how many times Warsh talks about “trimmed mean PCE” at today’s press conference is probably the tell for how he pushes the FOMC to address inflation in coming months.

Continue to read the full PDF

This report is produced by the Janney Investment Strategy Group (ISG). It is the intellectual property of Janney Montgomery Scott LLC (Janney) and may not be reproduced, distributed, or published by any person for any purpose without Janney’s express prior written consent. This report is to be used for informational purposes only. In no event should it be construed as a solicitation or offer to purchase or sell a security. The information presented herein is taken from sources believed to be reliable but is not guaranteed by Janney as to accuracy or completeness. Any issue named or rates mentioned are used for illustrative purposes only and may not represent the specific features or securities available at a given time. Preliminary Official Statements, Final Official Statements, or Prospectuses for any new issues mentioned herein are available upon request. The value of and income from investments may vary because of changes in interest rates, foreign exchange rates, securities prices, market indexes, as well as operational or financial conditions of issuers or other factors. Past performance is not necessarily a guide to future performance. For investment advice specific to your situation, or for additional information on this or other topics, please contact your Janney FA and/or your tax or legal advisor.