Key takeaways

• In his first meeting as Fed chair, Kevin Warsh unveiled a shorter policy statement with less forward guidance on rates.
• Policy rates were unchanged in June, but a more divided, inflation focused FOMC prompted a hawkish market reaction.
• For now, the USD is likely to remain supported, and we have likely already seen the low in the USD for 2026.

In his first meeting as the Federal Reserve (Fed) Chair, Kevin Warsh announced that US policy rates were left unchanged at 3.50-3.75% at the 16-17 June meeting, as widely expected. The accompanying statement was notably shorter, with an apparent emphasis on the price stability element of the dual mandate, and no retention of a bias to ease.

The updated plot contained 18 projections, with Fed Chair Warsh confirming he did not add his own. Nine Federal Open Market Committee (FOMC) members see at least one hike as likely in 2026, while nine expect unchanged or lower rates, underscoring a more divided FOMC. The median projection for 2026 GDP was revised down, while inflation projections were revised notably higher. Together, this suggests a hawkish shift in views among FOMC policymakers was even more broad-based than markets had anticipated, reflecting inflation concerns. The USD strengthened, with the US Dollar Index (DXY) surpassing 100.

Source: Federal Reserve

Fed Chair Warsh also announced the formation of a task force to assess potential changes to Fed communications, alongside four additional task forces on other topics. He indicated work would begin “in the next couple of weeks”, with most – if not all − task forces expected to reach conclusions by year-end.

Our economists’ view is that the FOMC will hold the federal funds target range steady through 2026 and 2027. In contrast, markets are fully pricing in a 25bp hike, with a 50% chance of a second 25bp hike, by end-2026 (Bloomberg, 18 June 2026).

Overall, the June meeting points to a more divided FOMC than markets had anticipated, and the USD has benefited accordingly. While Fed Chair Warsh did not provide forward guidance, his press conference also offered little to suggest he will be a consistently dovish voice on the Committee. For now, rates and FX markets appear to be leaning towards the hawkish cohort, implying the USD is likely to remain supported and that we may already have seen the 2026 low in the DXY.

https://www.hsbc.com.my/wealth/insights/fx-insights/fx-viewpoint/usd-stronger-amid-a-divided-fed-in-june/