New Fed Chairman, same policy interest rate 

June 17, 2026

Richard Schmidt

In a move that was widely anticipated, the U.S. Federal Reserve (Fed) kicked off the Kevin Warsh era by holding its target benchmark interest rate at 3.5-to-3.75%, following its June Federal Open Market Committee (FOMC) meeting. Despite being President Trump’s preferred candidate to lead the Fed (the President being a vocal critic of outgoing Chair Jerome Powell, calling for lower interest rates while the Fed held steady), new Chair Warsh did not abruptly make significant policy changes, as evidenced by this month’s announcement. 

In his first FOMC meeting press conference, Chairman Warsh announced the end of forward guidance in FOMC meeting statements and the use of press conferences only when something important must be said. Putting his own stamp on the Fed, he also announced five new task forces, charged with “rethinking practices to move the Fed forward” in the areas of Fed communications, the Fed’s balance sheet, data sources, productivity and jobs, and the Fed’s inflation framework. The idea here is to engage the best minds, internal and external to the Fed, to better inform future Fed policy decisions. 

Taken from the Fed’s noticeably shorter statement, “Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East. Productivity growth and capital investment are strong. Job gains have kept pace with the workforce, and the unemployment rate has changed little.” Furthermore, “Inflation remains elevated relative to the Committee's 2% goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy. The Committee will deliver price stability.”

In the Fed’s latest Summary of Economic Projections (SEP), growth and labour forecasts are slightly changed from March. Inflation expectations, however, are materially higher in the near term, 3.6% for 2026 (up from 2.7%) before settling at the Fed’s 2% target in 2028 (unchanged). Interest rate projections have also been revised higher, but expectations across FOMC members are varied to say the least. For the 2026 ‘dot plot’ (a distribution chart showing where each FOMC member expects interest rates to be), a single member expects one 0.25% cut, eight members expect the status quo, three members expect one 0.25% hike, five members expect two 0.25% hikes and one member penciled in three 0.25% hikes. Interestingly, the Chairman declined to provide his dot, confirming he was the missing dot during the press conference. Projections for 2027 and 2028 are equally diverse, but the median forecast is 3.6% (in line with the current target rate) and 3.4% respectively.

Currently, we continue to see the Fed making no changes to policy in 2026, though admittedly, we would be more confident in this call when we see energy markets renormalize. 

The strategic asset allocation of our clients’ portfolios remains unchanged, we continue to focus on the long term—building around long-term goals, long-term time horizons and long-term capital market expectations, which remain little changed. In client portfolios that include a tactical asset allocation component, over the next 12-to-18 months where opportunities and risks are a bit clearer, we continue to be tactically overweight equities versus fixed income and cash.

The current environment, where uncertainty is elevated and various factors are pulling the economy and markets in different directions, really reinforces the value of professional portfolio management. Diversification across multiple asset classes, regions, styles and sectors is as important as ever. As always, we will continue to watch how things develop, how policy makers respond, how businesses adjust and more.

The next Fed interest rate announcement is scheduled for July 29^th. 

Richard Schmidt, CFA, is a Portfolio Manager with the Multi-Asset Management Team of Scotia Global Asset Management. His primary focus is on North American equity funds and pools.