June 17, 2026 FOMC Meeting Analysis

Hello, everyone. My name is Andrew Paolillo, and thank you for joining us today for our FOMC Instant Reaction video.

Today, as widely expected, the Federal Reserve held rates constant within their policy range of 350 to 375.

Also expected, but which was a change, was the fact that the communication strategy has pivoted while the policy range has remained constant.

The statement, the press release, was shorter, simpler, and with Chairman Kevin Warsh, his first meeting leading the FOMC, removes forward guidance, which is a departure from what we had seen in previous meetings.

The dot plot, which is the collection of expectations of economic data and future rates that the FOMC governors project out, cuts have largely disappeared from the expectation, and now it’s much more of a neutral posture in relation to the possibility of spikes or cuts coming down the pike.

As the Fed has the dual mandate of managing labor markets, as well as inflation concerns, the pivot clearly has moved in the direction of a focus on inflation.

Chairman Warsh noted that the labor markets remain resilient, strong, and in particular, highlighted productivity gains that are very supportive of a growing and expanding economy that may not necessitate policy moves to tackle inflation.

But nonetheless, with inflation considerably above the 2% target, that is the primary concern for the FOMC in terms of looking at the path of interest rates.

Chairman Warsh noted that the expectation is that the 2% target in inflation may not be reached until 2028.

The bottom line is that today’s meeting was less about the change in rates and more about how the Fed intends to communicate future policy.

So, as we think about the implications for our members, we see that the instant reaction in terms of the treasury curve was that rates between six months and three years jumped up considerably, while there was minimal change at the very front end and at the very long end.

So what we can take away from this is that the expectation, at least from the market perspective, is that higher for longer may be back in vogue right now.

So what this means for depository institutions is that competition for gathering cost-effective deposits may still remain very challenging.

And certainly, as the shape of the yield curve moves towards more of a positive slope, that changes the dynamics about where on the yield curve you may want to target your activity.

In terms of lending activity, higher intermediate-term rates may impact real estate-related lending like commercial real estate and residential loans, both in terms of pressuring potential growth on new origination activity, but also the performance and activity related to the existing portfolio.

For insurance companies and those focusing more on the investment portfolio, the move to the reduced communication strategy may increase uncertainty and volatility as it relates to spreads on investments, which may create some opportunity and some bifurcation in industries that are struggling more as the economy evolves, and those who are benefiting and seeing strength in their spreads.