Beneath the Fed's consensus lies significant underlying disagreement; Warsh's first policy meeting signaled multiple changes.
2026-06-18 10:28:54
Newly appointed Federal Reserve Chairman Kevin Warsh completed his first policy meeting since taking office. All members unanimously agreed to maintain the current interest rate range, but there was a split on whether to raise interest rates this year, and the members had discussed a rate cut plan.
This meeting significantly streamlined policy statements and weakened forward guidance, while simultaneously launching comprehensive internal reforms. Hawkish expectations triggered a simultaneous pullback in stocks, gold, and bonds. Senior industry analysts believe that the short-term decline in gold prices does not change the long-term safe-haven value of gold.
The Federal Open Market Committee (FOMC) unanimously voted to maintain the benchmark interest rate at 3.5%-3.75%, canceling previous expectations of a rate cut and clarifying that price stability is the core objective. This policy statement was significantly streamlined, reduced by approximately 62% compared to last month. Warsh described the intense internal discussions as a healthy debate, ultimately leading to a unified decision.
Danielle DiMartino Booth, CEO of QI Research and former Dallas Fed advisor, said the unanimous vote exceeded all market expectations. Beneath the apparent consensus, the 18 officials who submitted forecasts were evenly divided, with 9 predicting at least one rate hike this year, and the other 9 expecting no change or a rate cut. Unlike previous chairs, Warsh did not disclose his personal interest rate projections; the median economic forecast shows a 3.8% interest rate by the end of 2026.
Many senior committee members have long questioned the drawbacks of quantitative easing and frequent public pronouncements, and generally support the direction of this reform. Outgoing Chairman Jerome Powell also agrees that the Federal Reserve should return to a concise and restrained communication style.
Hawkish policy expectations quickly triggered an asset sell-off, with the two-year US Treasury yield rising 10 basis points. A stronger dollar led to a 1.70% drop in spot gold prices, closing at $4257.60 per ounce. US stocks also weakened during the session. The yield curve flattened significantly, highlighting panic in the bond market.
The Federal Reserve raised its median inflation forecast to 3.6% and core inflation to 3.3%, while maintaining its assessment of robust economic growth and an unemployment rate of 4.3%.
Goldman Sachs asset management analyst Kay Haigh said that while the Federal Reserve is likely to avoid raising interest rates, its policy maneuvering space is very limited.
Warsh announced the establishment of multiple special task forces to comprehensively review the Fed's core systems, including its communication mechanisms, balance sheet, and inflation statistics framework. All research work must be completed by the end of this year, and the 2% inflation target will remain unchanged.
Danielle DiMartino Booth stated that the pace of this reform is unprecedented in the Federal Reserve's century-long history, with the core objective of establishing a completely new standard for measuring inflation.
In response to the market's heavy reliance on forward guidance, Warsh opted to reduce pre-emptive policy pronouncements, while suggesting that policy easing should be assessed on a sector-by-sector basis: the monetary environment is relatively tight in the real estate sector, while the financial markets have not been significantly constrained. This conveys an attitude of policy independence from market fluctuations, consistent with the thinking of his predecessor, Powell.
The recent drop in gold prices was driven by short-term trading factors such as rising real interest rates and a stronger dollar, and central banks around the world did not sell off gold.
Financial data shows that market leverage has reached a record high, with risks in private lending and commercial real estate continuing to escalate. A subsequent outbreak of these risks may force the Federal Reserve to adjust its monetary policy. Analysts point out that if the Fed maintains high interest rates for an extended period, it could easily trigger a crisis in the private lending market, at which point gold would become a core safe-haven asset. This current pullback presents a rare opportunity to position oneself. The current sharp fluctuations in the US Treasury market are an easily overlooked risk signal, and further volatility in capital markets may intensify.
Overall, Danielle DiMartino Booth remains optimistic about the reforms, and Walsh's measures, such as streamlining communication and optimizing the policy framework, are highly consistent with her reform proposals over the years.
Overall , this interest rate meeting only exerted short-term downward pressure on precious metals and risk assets; the Fed's internal structural reforms remain the long-term theme. High inflation, multiple risks lurking in the financial system, and continued gold purchases by global central banks mean that the medium- to long-term investment logic for gold has not changed due to the short-term decline.
This meeting significantly streamlined policy statements and weakened forward guidance, while simultaneously launching comprehensive internal reforms. Hawkish expectations triggered a simultaneous pullback in stocks, gold, and bonds. Senior industry analysts believe that the short-term decline in gold prices does not change the long-term safe-haven value of gold.
The interest rate decision passed unanimously, but internal policy views were severely divided.
The Federal Open Market Committee (FOMC) unanimously voted to maintain the benchmark interest rate at 3.5%-3.75%, canceling previous expectations of a rate cut and clarifying that price stability is the core objective. This policy statement was significantly streamlined, reduced by approximately 62% compared to last month. Warsh described the intense internal discussions as a healthy debate, ultimately leading to a unified decision.
Danielle DiMartino Booth, CEO of QI Research and former Dallas Fed advisor, said the unanimous vote exceeded all market expectations. Beneath the apparent consensus, the 18 officials who submitted forecasts were evenly divided, with 9 predicting at least one rate hike this year, and the other 9 expecting no change or a rate cut. Unlike previous chairs, Warsh did not disclose his personal interest rate projections; the median economic forecast shows a 3.8% interest rate by the end of 2026.
Many senior committee members have long questioned the drawbacks of quantitative easing and frequent public pronouncements, and generally support the direction of this reform. Outgoing Chairman Jerome Powell also agrees that the Federal Reserve should return to a concise and restrained communication style.
Hawkish expectations impact the entire market, and risks to the real economy are gradually being exposed.
Hawkish policy expectations quickly triggered an asset sell-off, with the two-year US Treasury yield rising 10 basis points. A stronger dollar led to a 1.70% drop in spot gold prices, closing at $4257.60 per ounce. US stocks also weakened during the session. The yield curve flattened significantly, highlighting panic in the bond market.
The Federal Reserve raised its median inflation forecast to 3.6% and core inflation to 3.3%, while maintaining its assessment of robust economic growth and an unemployment rate of 4.3%.
Goldman Sachs asset management analyst Kay Haigh said that while the Federal Reserve is likely to avoid raising interest rates, its policy maneuvering space is very limited.
A comprehensive internal reform was launched to reshape the inflation measurement and communication system.
Warsh announced the establishment of multiple special task forces to comprehensively review the Fed's core systems, including its communication mechanisms, balance sheet, and inflation statistics framework. All research work must be completed by the end of this year, and the 2% inflation target will remain unchanged.
Danielle DiMartino Booth stated that the pace of this reform is unprecedented in the Federal Reserve's century-long history, with the core objective of establishing a completely new standard for measuring inflation.
In response to the market's heavy reliance on forward guidance, Warsh opted to reduce pre-emptive policy pronouncements, while suggesting that policy easing should be assessed on a sector-by-sector basis: the monetary environment is relatively tight in the real estate sector, while the financial markets have not been significantly constrained. This conveys an attitude of policy independence from market fluctuations, consistent with the thinking of his predecessor, Powell.
The short-term pullback in gold prices is due to trading disturbances; financial risks are beneficial for long-term gold investment.
The recent drop in gold prices was driven by short-term trading factors such as rising real interest rates and a stronger dollar, and central banks around the world did not sell off gold.
Financial data shows that market leverage has reached a record high, with risks in private lending and commercial real estate continuing to escalate. A subsequent outbreak of these risks may force the Federal Reserve to adjust its monetary policy. Analysts point out that if the Fed maintains high interest rates for an extended period, it could easily trigger a crisis in the private lending market, at which point gold would become a core safe-haven asset. This current pullback presents a rare opportunity to position oneself. The current sharp fluctuations in the US Treasury market are an easily overlooked risk signal, and further volatility in capital markets may intensify.
Overall, Danielle DiMartino Booth remains optimistic about the reforms, and Walsh's measures, such as streamlining communication and optimizing the policy framework, are highly consistent with her reform proposals over the years.
Overall , this interest rate meeting only exerted short-term downward pressure on precious metals and risk assets; the Fed's internal structural reforms remain the long-term theme. High inflation, multiple risks lurking in the financial system, and continued gold purchases by global central banks mean that the medium- to long-term investment logic for gold has not changed due to the short-term decline.
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