Payden & Rygel: Fed holds interest rates steady

Payden & Rygel: Fed holds interest rates steady

18 juni 2026

Rente Fed

The commentary below was drafted ahead of Wednesday's interest rate decision.

By Jeffrey Cleveland, Chief Economist at Payden & Rygel

We expect the Fed to hold rates steady today, though some hawkish voters could dissent. 

In April, the three regional dissenters (Hammack, Kashkari, Logan) objected to the easing-bias language rather than calling for a rate hike, so a repeat is more likely than a formal vote to raise rates. A neutral policy stance is the path of least resistance.

New Chair Warsh has been an outspoken critic of excessive groupthink at the Fed, a view we share, so it will be interesting to see how he handles dissent that runs counter to his prior dovish leanings.

At his first press conference, Warsh may set out his goals to the public, particularly regarding Fed communication: the frequency and length of press conferences, whether the dot plot survives, and any changes to forward guidance.

Slimming the dot plot and reducing communication could be a plus (Powell extended the press conferences to every meeting, while Bernanke and Yellen did only four per year), though historically, less transparency has led to greater market volatility.

Other changes floated during his campaign, such as a new balance-sheet framework, will take years, even decades, to complete. Communication is different. The press conference is the Chair's own vehicle, so its frequency, length, format, and whether he submits his own dot are his to change without a committee vote, and we expect those to move first.

The dot plot and the wider SEP are another matter: altering or removing them requires a Committee vote, so those shifts, if they come, will be slower, if at all.

Warsh may choose to withhold his own dot from the June plot. Even so, we expect the median dot to move from one cut in 2026 to none, as even Chris Waller, one of the committee's more dovish voices, has recently argued that sticky inflation and a stabilizing labor market warrant keeping rates restrictive.

We also expect most policymakers to pencil in higher PCE, a lower unemployment rate, and stronger real GDP growth than in March.

Warsh has cited the Dallas Fed's Trimmed Mean PCE as an alternative to core PCE in his congressional testimony and may return to it today. Trimmed mean has been moderating (2.3% in April) while core continues to firm (3.3%), so leaning on it would strengthen the case for cuts.

The catch, which we'd watch him address, is that the measure tends to bias inflation downward, so a shift in the Fed's preferred gauge is not a free lunch. Also, not sure how much support there would be for replacing core PCE with trimmed mean.

Further out, our forecast is for continued solid GDP growth in 2026 (2%ish), a stable unemployment rate, and sticky inflation around 3% through year-end 2026, which will leave the Fed on hold — but not hiking.

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