The Fed just did the opposite of what markets ordered.
Grab a strong one.
Today, we unpick why a promised rate cut became a threat of a hike. And why the new chair won't show his own maths.
Coffee at the ready…
The Big Sip
A Fed rate hike in 2026 just flipped from unlikely to the base case.
On Wednesday, the Fed held rates at 3.50–3.75%, but nine of eighteen officials now pencil in a hike.
Higher-for-longer keeps mortgages, cards and business loans expensive, and the cut markets expected are dead.
Stranger still:
The new chair, Kevin Warsh, refused to submit his own dot.
A central banker who hides his own numbers has a reason. Shyness isn't it.
Here’s Your Brew
Start with the dots…
In March, the median official saw rates ending 2026 at 3.4%. The signal was one cut. Now the median sits at 3.8%. Six officials want two hikes.
17 of 18 see inflation risks pointing up.
Markets flinched.
The Dow shed 507 points after touching a record high. The 2-year Treasury yield jumped 16 basis points. Bitcoin slid toward $63,000.
Short-term borrowing costs reprice fast when the Fed turns.
Now, the missing dot. Warsh did not skip it.
He is questioning the whole ritual. He launched task forces to review the Fed's dot plot, press conferences and guidance.
The message is blunt:
Markets lean too heavily on the Fed's hints, so he is binning them.
The Fed turned hawkish as oil was falling.
A US–Iran deal, signed in Switzerland this week, reopens the Strait of Hormuz. Brent slid to about $76. When the Fed frets about inflation while energy prices cool, the worry is no longer about pump prices.
It is something stickier underneath.
Two Sides, One Mug
Pro: Warsh is right to kill the cut. Inflation sits well above 2%, and credibility beats comfort.
Con: A hawkish surprise plus scrapped guidance can jolt markets and squeeze borrowers, just as oil was easing the pressure.
Our read: Fighting sticky inflation is sound. Doing it by surprise, while scrapping the Fed's signals, adds avoidable risk.
Receipt of the Day
[Report] Federal Reserve — "Summary of Economic Projections, 17 June 2026"
The median official now sees the funds rate at 3.8% by year-end, up from 3.4% in March.
Why it matters: It is the Fed's own paperwork conceding the next move points up, not down.
Spit Take
Hike odds by December: 24% a month ago, now 77%.
(CME FedWatch)
Extra Curricular Coffee Break Links
[Analysis] CNBC — "Warsh announces task forces to overhaul Fed operations." The new chair is rewiring how the Fed talks to you, well beyond where rates land.
[Report] Al Jazeera — "Oil falls as US and Iran sign framework to end war." The inflation shock the Fed cited is the same force now deflating.
[Analysis] Mortgage News Daily — "Mortgage rates spike in response to Fed." Home loans erased a week of progress in one afternoon. You pay the hawkish turn first.
Mugshot Poll 📊
Warsh hid his own dot. Your verdict?
• Bold honesty: guessing helps no one
• Power grab: less signal, more mystique
• Coward's move: show your maths
• Wake me when rates actually move
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