Fed holds rates steady in first decision under new Chairman Kevin Warsh

The Federal Reserve left its benchmark fed funds rate range unchanged at 3.50%-3.75% on Wednesday, a move markets had expected nearly unanimously.

"Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East," the press release said. "Inflation remains elevated relative to the Committee's 2 percent goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy."

"The Committee will deliver price stability," it added.

Policymakers are increasingly lean towards a rate hike this year, expecting the fed funds rate at 3.8% at the end of 2026, versus a 3.4% in the March projection. Easier monetary policy will not come anytime soon as they expect rates at 3.6% for 2027 and 3.4% in 2028, both higher than their previous guidance.

They also see higher inflation, with personal consumption expenditure (PCE) rising 3.6 this year and core PCE inflation at 3.3%, compared to a forecast of 2.7%-2.7% in March.

Trading around $66,000 earlier, bitcoin BTC$64,187.17 fell to $64,800 in the minutes following the decision, and recently stabilized around $65,300. The S&P 500 and Nasdaq 100 both dropped nearly 1%, erasing earlier gains.

This was the first U.S. central bank policy meeting led by Kevin Warsh, who took over as chair from Jerome Powell after being confirmed by the Senate last month.

The focus now shifts to Warsh's post-meeting press conference, beginning at 2:30 p.m. ET, and to what he says about the road ahead under his leadership at the central bank.

Markets have spent the past several months steadily dialing back expectations for any rate cuts as inflation proved more stubborn and labor market data remained resilient. Traders now see a growing chance that the Fed's next move could be a rate hike rather than a cut.

Warsh's comments could carry added weight because he has previously criticized the Fed's use of forward guidance and quarterly economic projections, including the closely watched dot plot.

Investors will be looking for signs of whether the central bank plans to communicate policy differently under his leadership.

In May, combined exchange volumes fell 3.45% to $4.41T; the lowest since September 2024. RWA perpetual futures volumes rose 10.4% against the trend, hitting a new all-time high.