Wall Street discards subdued expectations ahead of Kevin Warsh’s first FOMC meeting

Wall Street largely abandoned expectations of a rate cut by the Federal Reserve this year ahead of the first meeting of the Federal Open Market Committee chaired by Fed Chairman Kevin Warsh on June 16-17.

According to a Reuters poll conducted between June 4 and June 9, 72 out of 102 economists expect the federal funds rate to remain within a range of 3.50% to 3.75% until the end of 2026.

The survey showed the strongest consensus so far this year that policymakers are unlikely to cut borrowing costs in the coming months.

The rising case follows a succession of stronger-than-expected economic data and persistent inflation concerns. Futures markets have also moved in the same direction, with interest rate contracts now pricing at least one potential hike in late 2026 instead of a return to rate cuts.

Inflation worries continue to dominate the Fed’s outlook

New inflation data due on June 10 has become a key focus for investors ahead of the June policy meeting. According to Trading Economics forecasts cited earlier by crypto.news, the headline Consumer Price Index is expected to rise 0.5% month-on-month in May after rising 0.6% in April.

Annual CPI is expected to grow to 4.2% from 3.8%, while core CPI, which excludes food and energy, is expected to increase by 0.3% monthly and 2.9% year-on-year.

Those forecasts come as inflation remains above the Federal Reserve’s target. A separate Reuters poll showed economists expect higher price pressures to continue, while the Fed’s preferred inflation gauge, the Personal Consumption Expenditures Price Index, reached 3.8% in April.

Energy markets added another source of concern. Several economists cited by Reuters pointed to regional tensions and disruptions in energy markets in the Middle East as factors that could keep inflation high. Recent military exchanges between Israel and Iran have contributed to renewed concerns about high commodity prices.

Commenting on the policy outlook, Wells Fargo’s chief economist, Tom Porcelli, said it would be difficult for Federal Reserve officials to justify lowering rates under current conditions.

“It will be very difficult for the Fed to justify any action now and for the foreseeable future. It will be very difficult to get the consensus of Fed officials to go along with the idea of ​​reducing rates.”

Porcelli added that a quick de-escalation of tensions involving Iran could change the outlook but said there was little evidence pointing in that direction.

Markets are preparing for a long bullish position

Expectations for tighter policy also received support from major financial institutions. Last week, BNP Paribas updated its forecast and said the Federal Reserve could start raising interest rates in December 2026.

According to crypto.news, the French bank is now expecting three rate hikes that will effectively reverse the three reductions coming in 2025.

Warsh’s first FOMC meeting comes as President Donald Trump continues to publicly advocate for low interest rates. However, Warsh pointed out that monetary policy decisions will remain independent of political pressure.

Rabobank’s chief U.S. strategist Philip Marey told Reuters that inflation risks continue to outweigh the case for policy easing.

“The risk to persistent inflation and few contractions is likely to be higher than any quick decision,” Marey said. “The most optimistic scenario has just gone out the window.”

Outside of traditional markets, some institutional crypto investors seem to be taking a different view of the high short-term uncertainty.

Javier Martinez, CEO at sFOX, told crypto.news that institutions are accumulating positions and making infrastructure investments while they await regulatory developments such as the CLARITY Act.

“From the outside, this period may look like uncertainty. But inside the institutions, it is a window where money is placed and infrastructure decisions are made before the crypto market structure matures.”