Market Minute: FOMC Meeting - Rate Hike Uncertainty

June 17, 2026 by Joseph Brusuelas

The past couple of weeks have led to a reset of investor expectations regarding the Federal Reserve's next move.

Investors are now pricing in a 25 basis-point rate hike next March, a shift from previous expectations of at least one rate cut by the end of this year.

The Fed's decision will depend on the impact of the supply shock caused by the war, the repair of energy production in the Persian Gulf, oil prices, and the durability of the United States and Iran's memorandum of understanding.

The personal consumption expenditures index, the Fed's preferred gauge, is above the central bank's 2% target, while the consumer price index and producer price index both indicate rising costs.

In light of the elevated prices, keeping rates where they are is the most appropriate policy action at this time.

The Fed's preferred inflation measures do not suggest an inflation problem is in the making, and therefore a rate hike is not indicated.

The FOMC will remove the easing bias in its statement, and we think investors should proceed with caution on assuming how fast and how far top-line inflation growth will slow.

We expect the federal funds rate to remain in a range between 4.25% and 4.5% at the FOMC meeting this week and do not expect Chairman Jerome Powell to imply that a September rate cut is in the cards.

Filed Under: Market Minute, USA, x-Featured Economics, Inflation, Interest Rates, Market Minute, FOMC, Federal Reserve, Joseph Brusuelas, Federal Open Market Committee, Interest Rates, FOMC Meeting, Rate Hike Uncertainty