CB Views: June 2026 FOMC Preview

Scenario 

Probability 

Assessment

Dovish Hold

 30%

• An indication that AI is currently bringing about a disinflationary productivity boom, mentions that the Fed is not only prepared to “look-thru” the recent supply-shock, but also that these inflationary pressures have actually peaked (either with respect to tariffs or energy), would all be perceived as dovish as it implies that the Fed will restart the normalization (to lower rates) soon.

 Neutral Hold

Base-Case

 60%

• Statement: We expect the FOMC statement to drop the “easing bias” inherent in the following sentence: “In considering the extent and timing of additional adjustments to the target range for the federal funds rate...” The statement may signal the improvement in monthly job gains, but economic activity will likely continue to be characterized as “solid” (not upgraded to “strong”).

• SEP Updates: Median SEP forecasts are expected to show a decent uptick in 2026 PCE inflation, reflecting increased supply-side pressures, but will likely show no material change in the growth and unemployment outlook. As a result, we expect a general upward shift in the dot plot, with the median Fed Funds rate projection to signal no cuts in 2026 (compared to March SEP which still had one cut). We expect the long-run dot to remain unchanged (3.125%), implying that the Fed is still in restrictive territory and needs to normalize rates in the years ahead. It’s a close call, but we expect the dot plot projections to still signal that rates normalization will resume and finish in 2027.

• Presser: We expect chair Warsh to be ready on multiple fronts. One, he will speak for the FOMC and clearly explain why they shifted to neutral. Two, he will provide less forward guidance by keeping answers short and data driven. Three, given Warsh has expressed interest in making changes, he will be prepared to address the more controversial aspects like the balance-sheet adjustments. We think he will state the plan is to go down traditional channels and protocols (i.e., no need to rush).

Hawkish Hold

10%

• Our neutral case already expects the easing bias to be removed (a compromise to the hawks) and for the SEPs to come across slightly hawkish. We doubt SEP contributors want to go uber-hawkish (and to suggest an end to rates normalization at this stage), but it’s possible that the SEPs shift the two implied cuts needed to reach the long-run neutral rate as one cut in 2027 and one in 2028.