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June 17, 2026 FOMC Decisions and the Kevin Warsh Era 👇
Macroeconomic Backdrop and Historic Turning Point
Today’s first Federal Open Market Committee (FOMC) meeting under Kevin Warsh’s leadership carries historic importance not only for the setting of short-term interest rates, but also because it may signal a fundamental regime change in the communication, inflation measurement, and balance sheet management philosophy of the world’s largest central bank. The policy rate will be kept unchanged in the 3.50% to 3.75% range. But the real driver of market pricing will be the messages Warsh delivers at the press conference and the committee’s revised forward-looking macroeconomic projections.
The current macroeconomic backdrop has turned into an intersection point of powerful forces moving in opposite directions, geopolitical shocks, and technological revolutions. On one side, there is the sharp energy shock created by the U.S.-Iran conflict that broke out in late February 2026 and paralyzed supply chains through the Strait of Hormuz.
On the other side, debates around the productivity gains triggered by the artificial intelligence (AI) revolution and the surprising resilience in the labor market stand out as the main macroeconomic factors making the direction of monetary policy harder to determine.
In this environment, Warsh needs to satisfy the hawkish wing fighting inflation, balance the White House’s growth-oriented demands, and convince the bond vigilantes at the same time.
Kevin Warsh Doctrine
Kevin Warsh’s monetary policy approach is based on a structural reform agenda that clearly separates him from his predecessors and aims to reduce the central bank’s footprint in the economy.
The Warsh doctrine sees Core PCE, which completely excludes energy and food prices, as structurally flawed, defines it only as a rough estimate, and clearly stated during Senate confirmation hearings that he prefers Trimmed Mean inflation indicators, which systematically trim volatility from the extreme ends of price changes.
This is already necessary for the AI revolution as well. Growth must be ignited, debt/GDP must be lowered, and the AI revolution must be supported. Inflation should be used as a weapon to carefully reduce the value of the currency in which the debt will be repaid. This is the main tactic!
Because while energy shocks caused by the Iran war pushed headline inflation up to 4.2% and Core PCE stayed around 3.29%, the Dallas Fed Trimmed Mean PCE is moving much closer to the Fed’s 2% target at 2.35%. So there is no problem 😊 I will not get into this debate because no country in the world shows inflation truthfully.
Warsh’s focus on this metric creates a theoretical foundation that could justify possible rate cuts even in an environment where headline inflation remains high, by arguing that the underlying trend is actually under control. Of course, this approach is not rational, but the AI revolution does not require rational behavior either. I am not looking at it from a market perspective. If I were in his place, I would do the same thing.
Another cornerstone of Warsh’s monetary policy philosophy is the elimination of forward guidance, where the central bank gives markets detailed clues about future rate moves, and the famous Dot Plot, which is part of the Summary of Economic Projections (SEP). Warsh argues that these kinds of long-term projections force policymakers into premature commitments before the data set changes, restrict their flexibility, and were one of the main reasons behind the “inflation is transitory” mistake of 2021-2022. For this to be implemented, all market participants must have infinite trust in the Fed. This perspective is entirely trust based. That is the core metric for its implementation.
The June 17 FOMC meeting will be the first real-time test of Warsh’s effort to change this communication regime. I see a high probability that Warsh, who adopts former Fed Chair Alan Greenspan’s data-driven, flexible, meeting-by-meeting approach, will avoid giving clear forward-looking signals at the press conference and leave markets in strategic ambiguity. Market expectations are that Warsh may not be able to suddenly remove the Dot Plot at his first meeting, since that would require a majority vote within the committee, but he may refuse to submit his own projection point or make verbal interventions that reduce the weight of these tools in market pricing. This could initially leave investors without the guidance they are used to when pricing future rate-cut expectations and increase volatility in the bond market.
According to Warsh, the fair and democratic tool the central bank should use to intervene in the economy is the policy rate; because while interest rates penetrate every vein of the economy, balance sheet expansion disproportionately benefits only financial asset owners. In this context, he supports continuing quantitative tightening (QT) decisively, having the Fed fully exit the U.S. housing market by reducing its mortgage-backed securities (MBS) portfolio to zero, and returning to a structure made up only of short-term Treasury bills. But he cannot do this from the very beginning.
At the press conference, Warsh may refer to concepts such as Treasury market functioning or balance sheet optimization, allowing the backdoor liquidity mechanism to remain active.
Analyses show that the most obvious change in the statement will be the complete removal of the easing bias language that appeared in previous statements and implied that the Fed’s next move would most likely be a rate cut.
The real focus of the meeting will be the Dot Plot. In the previous Summary of Economic Projections (SEP), released in March 2026, the median expectation pointed to rates falling to 3.4% by the end of 2026, meaning one 25 basis point rate cut. Where this median point moves in the June projections will determine the market’s medium-term direction:
Median Stays Unchanged (1 Cut): This would show that the committee under Warsh’s leadership is maintaining its dovish tilt despite 4.2% inflation, viewing price increases entirely as a temporary energy shock and referencing alternative measures such as the Trimmed Mean.
Median Moves Higher (0 Cuts): This would formalize that the Fed acknowledges current inflationary pressures, aligns with market expectations, and will pass through 2026 without any cuts.
Median Peaks (Rate Hike Projection): This would signal that hawks have taken control of the committee, prove that Lisa Cook’s “I am ready to hike” message has found ground inside the committee, and could create a severe shock in the equity market.
What does 🦇Batman expect? How should we take action based on developments? What are the possible future scenarios?
The main scenario I currently see is the ...
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