Executive Summary 

• Last week’s FOMC meeting marked Kevin Warsh’s first meeting as Chair, with the committee leaving rates unchanged.

• The Fed faces a resilient labor market and inflation that remains notably above its 2% target.

• Lower oil prices following the U.S.–Iran deal may ease price pressures, with bond markets signaling lower inflation expectations.

• While this meeting mostly maintained the status quo, Warsh is likely to pursue broader policy changes.

• A sustained decline in energy prices may ease inflation pressures, giving the Fed greater flexibility as it evaluates policy decisions.

Last week’s FOMC meeting marked Kevin Warsh’s first as Chair

Shown on the left is an illustrative timeline outlining key events surrounding Kevin Warsh’s nomination and confirmation as Federal Reserve Chair. Shown on the right is a non-exhaustive overview of the key takeaways from the June FOMC meeting.

• Kevin Warsh chaired his first FOMC meeting last week, at which the committee unanimously agreed to keep rates unchanged while introducing several incremental shifts to its policy approach.

• The Fed significantly shortened its statement and reduced its forward guidance, signaled a more hawkish outlook through the dot plot, and Warsh announced five new task forces to review Fed policies and frameworks.

The Fed faces a resilient labor market and inflation that remains notably above the 2% target

Shown on the left are seasonally adjusted U.S. nonfarm payroll figures. Shown on the right are year-over-year changes in the U.S. Consumer Price Index (CPI), with headline CPI shown in blue and core CPI shown in green. Headline CPI reflects changes in prices across all goods and services, while core CPI excludes food and energy prices to measure underlying inflation trends. The gray band represents the Federal Reserve’s target range consistent with its price stability objective.

• After heightened labor market concerns late last year, a rebound in payroll growth has eased employment worries, allowing the Fed to focus its attention on inflation.

• Elevated energy prices tied to the Middle East conflict pushed headline inflation well above the Fed’s target, while inflation excluding food and energy has stayed relatively well anchored.

Oil prices are retreating following the announcement of a U.S.-Iran deal, which may help ease inflation pressures

Shown on the left are the spot prices of Brent crude oil over time, measured in U.S. dollars per barrel. The dotted line represents the average market-implied Brent crude oil price based on futures contracts. Futures contracts reflect current market expectations for future oil prices and are not guaranteed forecasts of future spot prices. Shown on the right are Glenmede’s estimates for the impact of a one-time shock in the price of crude oil on the year-over-year growth for the Consumer Price Index in 2026 for the U.S. The line represents a spectrum of sensitivities for a range of changes in crude oil prices from no change to an increase of $100 per barrel. The dot represents the average Brent crude oil price since the start of the conflict. Actual results may differ materially from projections.

• Oil prices have declined following the announcement of the U.S.–Iran deal and could continue to ease toward pre-conflict levels if the agreement restores energy flows through the region.

• While the effects may take time to flow through, lower energy prices could lessen the impact of energy-driven inflation relative to prior projections.

Bond markets are signaling a more favorable inflation outlook, with expectations falling notably

• Market-based inflation expectations have declined meaningfully, with 1-year breakevens falling close to ~2%, signaling improved confidence in the near-term inflation outlook.

• The recent pullback suggests markets are increasingly looking through prior energy shocks rather than pricing sustained inflation pressure.

Fed funds expectations tilt hawkish, but rate hikes will likely be dependent on broader-based inflation

• The median 2026 fed funds projection moved from 3.4% to 3.8%, now sitting above the current policy midpoint and implying no cuts this year at face value.

• However, this median shift should not be taken at face value. The participant count fell to 18 from 19 in March, and when a panel of this size loses a participant at the low end of the distribution, the median can rise across all horizons independent of any genuine shift in conviction.

• If the post-ceasefire decline in energy costs continues to work its way through to headline inflation readings, the committee's freshly revised inflation projections may prove too pessimistic, and the door to rate cuts later this year could reopen. 

While this meeting mostly maintained the status quo, Warsh is likely to pursue broader policy changes

• Warsh announced the formation of five task forces at the press conference, covering Fed communications, the balance sheet, use and reliance on existing data sources, productivity and jobs in an era of transformation, and inflation frameworks.

• The task forces span nearly every dimension of how the Fed communicates, what it measures, and what it targets. The announcements signal an institution in active review rather than steady state, and investors should expect the operating framework of the Fed to look meaningfully different over Warsh's tenure than it did under his predecessor.

• While policy remained unchanged, the task forces highlight Warsh’s intention to pursue broader institutional reforms over time.