US: June FOMC Review

■ The policy rate remained unchanged as expected by the market, but the market reacted significantly due to the release of the possibility of a rate hike this year.  
■ The Federal Reserve officially withdrew its expectation of a rate cut this year, but the new chairman did not submit the SEP forecast, and further observation is needed in the short term. 
 
At the Federal Open Market Committee (FOMC) meeting held on June 16-17, the policy rate remained unchanged at 3.50% to 3.75% as expected by the market. The vote was unanimous. However, the Summary of Economic Projections (SEP) released at the meeting was interpreted by the market as hawkish (i.e., inclined toward further monetary policy tightening), and financial markets reacted accordingly: US Treasury yields rose, the dollar strengthened, and US stocks fell. In addition, since this June FOMC meeting was the first meeting chaired by the new Federal Reserve (FRB) Chairman Warsh, whether he would show a new policy direction was also closely watched. 
 
The main reason the June FOMC was interpreted as hawkish by the market was that the median policy rate forecast in the SEP was revised upward across the forecast horizon. Compared to the forecasts released in March, the 2026 forecast was revised upwards from 3.4% to 3.8%, the 2027 forecast from 3.1% to 3.6%, and the 2028 forecast from 3.1% to 3.4%. The market is most focused on the distribution of the 2026 forecast: of the 18 members who submitted forecasts (dot plot) (the Chairman did not submit a forecast), half, or nine members, expect one rate hike this year. Meanwhile, in the 2026 inflation forecast, the core personal consumption expenditure (PCE) deflator was revised upwards from 2.7% to 3.3%, further reinforcing the market's interpretation of this meeting as hawkish. 

 
In addition, the statement removed the previous statements regarding forward guidance (i.e., explanations of the future direction and outlook of monetary policy). The total word count of the statement was also significantly reduced from 341 words to 130 words, and the statement regarding the resolution result was simplified to "FOMC unanimously approved by a vote of 12-0." These changes, along with Chairman Warsh's plan to establish five special task forces announced at the press conference, are seen as part of the Fed's reform efforts. Chairman Warsh also indicated that even if forward guidance continues to be provided in the future, its content will remain limited and restrained. 
 
During this meeting, the Chairman himself did not submit forecasts in the SEP, preserving considerable flexibility for future monetary policy stances. Furthermore, with progress in the US-Iran peace talks, crude oil futures prices have fallen to their lowest levels since early March, and market concerns about rising inflation are gradually easing. Against this backdrop, the Fed has effectively withdrawn its previous expectation of a rate cut this year. Going forward, key factors to watch include: how many of the nine members who predicted a rate hike this year will have voting rights on the FOMC in 2026, as well as subsequent statements from Fed officials and changes in US economic data. For some time to come, these factors will be crucial in determining the future direction of monetary policy.