Warsh In, Cuts Out: Fed's First Dot Plot Under New Chair Priced a Hike, Crypto Got the Memo 📉

The Federal Reserve held its benchmark federal funds rate steady at 3.50% to 3.75% on June 17, the fourth consecutive meeting with no change, in the first policy decision under newly confirmed Chair Kevin Warsh, who took over from Jerome Powell after Senate confirmation in May. The rate decision itself carried no surprise, with the CME FedWatch tool showing a 97.4% probability of a hold ahead of the meeting. The signal came from the updated Summary of Economic Projections: the median year-end 2026 federal funds rate projection rose to 3.8% from 3.4% in March, the 2027 projection climbed to 3.6% from 3.1%, and the 2028 projection moved to 3.4% from 3.1%, with the dot plot dropping its last remaining projected cut for 2026 entirely. Half of FOMC participants now favor at least one rate hike this year, and Raymond James analysts had projected at least three voting members would pencil in a hike before December. Warsh himself declined to submit a dot, the first Fed chair in 14 years not to participate in the SEP, a move consistent with his longstanding criticism of forward guidance. In a State Street conference last year he said, "If you're not very good at something, you should do less of it. These forecasts have been abysmal. My dots wouldn't be perfect either, so I wouldn't give them," and he told the central bank last year to "Stop talking so much. More thinking, less talking."

Inflation forecasts moved higher alongside the rate path. The median 2026 PCE inflation projection rose to 3.6% from 2.7% in March, while core PCE was revised to 3.3% from 2.7%. Economists polled by Reuters projected consumer inflation at 4.2% year-over-year last month, with the PCE Price Index at 3.8% in April. The Fed's policy statement said economic activity is "expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East," referencing supply shocks in certain sectors including energy, and declared, "The Committee will deliver price stability." Bank of America expects policymakers to remove language suggesting a bias toward future rate cuts and to upgrade their assessment of the labor market following stronger-than-expected payroll reports. The median 2026 GDP growth forecast was revised down slightly to 2.2% from 2.4%, with 2027 unchanged at 2.3%, while the median 2026 unemployment projection improved to 4.3% from 4.4%. A Reuters poll of 102 economists found that 72 expect the Fed to keep rates unchanged until the end of 2026.

Rate-hike odds repriced sharply after the meeting, with futures traders pricing a 66% chance of at least one hike before year-end. The 2-year Treasury yield jumped more than 16 basis points to 4.22%, the 10-year benchmark sat near 4.47%, and the 30-year approached 4.97%. The Dow fell 507 points after hitting a record intraday. Odds of a hike by the September meeting climbed to roughly 70%, including a 20% chance of a double hike, up from about 30% a day earlier, and December pricing implied an 88% chance of at least one hike, with any 2026 rate cut collapsing to zero. Citadel has warned about a potential Fed rate hike by year-end. The European Central Bank is moving in parallel toward tightening, adding pressure on risk assets globally.

Crypto markets sold off on the hawkish shift. Bitcoin ($BTC) changed hands around $65,300 ahead of the announcement and dropped to roughly $64,000 in the aftermath, down about 1% on the day but still up 5% over the prior week, with the pullback bringing losses to around 4% from the local high. Ethereum ($ETH) fell 2% on June 17 to extend weekly losses above 6%, trading near $1,763. Solana ($SOL) had risen 13% over the last seven days to $73. XRP slipped 2.5% to $1.17, an 8% pullback on the week. Hyperliquid ($HYPE) lost 3% before recovering to $71, and about $450 million in positions were liquidated over 24 hours. Matt Mena, senior crypto research strategist at 21Shares, said the pause was "fully expected" and that $BTC was "structurally well-positioned" to revisit the $100,000 level in Q3 after near-term consolidation, identifying $70,000 as the next resistance and $62,000 to $60,000 as the support band where sophisticated players were actively hedging with put volumes.