The Federal Reserve should have already fully shifted to a strongly hawkish, structural stance.

The Federal Reserve announced the June interest rate decision and held the first press conference of the new Chair Kevin Woor, with only two key points:
- Maintaining interest rates unchanged, with a unanimous 12-0 vote, also means that Woor immediately demonstrated absolute control over the committee upon taking office, and there are no internal conflicts as previously speculated.
- The interest rate futures market has completely overturned the previous rate cut expectations. The latest pricing has shifted to fully expect a rate hike of 25 to 30 basis points before the end of the year, with 9 out of 18 officials predicting at least one rate hike before the year's end.
Apart from the data, as mentioned before, Woor has erased all forward guidance and dovish language that hinted at future rate paths over the past few years, returning to the strategic ambiguity style of former Fed Chair Greenspan.
As for whether there will be a rate hike, at least in my view, the probability is low. Based on last night’s logic and market performance, Woor’s real intention seems to be to replace actual rate hikes with expectations of hikes, and this approach is likely to be used for a long time.
There is a term in macroeconomics called expectation management tightening. Woor hopes to push up U.S. Treasury yields and tighten financial conditions by releasing extremely hawkish signals and rate hike threats. As long as the market completes work similar to rate hikes for him, the Fed may not need to actually raise rates in practice.
The Fed still maintains a tough stance, significantly raising PCE inflation expectations to 3.6%, clearing all dovish forward guidance to pave the way for this approach.
But for a long time, it is very likely to continue maintaining the 3.50% to 3.75% interest rate unchanged.