The Federal Open Market Committee, the Fed’s interest-rate setting body, is expected to leave rates unchanged on Wednesday at its first meeting under new chair Kevin Warsh, who took office less than a month ago, on May 22. Bank of America expects the updated Fed forecast released this evening to show no rate change through the end of this year, even though at least three committee members are likely to project at least one 0.25% hike by late 2026.
Attention will center on Warsh’s first press conference. Erik Weisman, chief economist and chief investment officer at MFS Investment Management, said this week that Warsh is likely to face a barrage of questions about how he plans to lead the Fed in the direction he has discussed for years. Weisman added that Warsh is still early in his tenure, may still be testing the committee’s mood, and may avoid major statements before building consensus inside the Fed.
Investors will also watch the updated rate outlook, known as the Dot Plot, which is part of the broader Summary of Economic Projections, or SEP, that also includes forecasts for growth, unemployment and inflation. The Fed releases the Dot Plot quarterly, and it is not an official Fed forecast, but the median of the meeting participants’ projections.
Most economists think Warsh will not present his own forecast at this meeting, both because he has been in the job only briefly and because of his long-held criticism of the Fed’s approach to policy and forecasting. In his congressional confirmation hearing, Warsh argued that the document reflects broader “overcommunication” by Fed officials. Former Fed monetary affairs chief Bill English said it seems likely Warsh will skip a forecast, and suggested other members who dislike the Dot Plot might do the same. Bank of America’s Aditya Bhave and Goldman Sachs’s David Mericle also said they expect Warsh to withhold his own dots, citing his past criticism of forward guidance, though Mericle said the outcome is not certain.
