WASHINGTON, DC — The Federal Open Market Committee held the federal funds rate at 3.50 to 3.75 percent on June 17, 2026 in a unanimous 12-0 vote, but the decision was the second-most important thing the committee said. The most important thing was the new Summary of Economic Projections. The median 2026 dot moved from 3.4 percent in March to 3.8 percent in June, a forty basis point hawkish shift that places the rate path above the current 3.625 percent midpoint for the first time since the November 2024 terminal hold. Markets had priced a 97 percent probability of a hold per CME FedWatch; almost no one had priced the median dot repricing. The 2-year Treasury yield jumped 8 basis points to 4.05 percent, the 10-year rose 6 basis points to 4.32 percent, and the 2s10s curve flattened further to 27 basis points, the flattest since March 2023. The dollar strengthened broadly (DXY 104.20, EUR/USD 1.0840, USD/JPY 152.40) and gold held near $4,300 an ounce as real yields rose.

The Hold Was Unanimous, but Warsh Withheld His Dot

Chair Kevin Warsh opened his first press conference at 2:30 PM Eastern by confirming the unanimous 12-0 vote and disclosing that he had not submitted a dot for himself. I did not submit a dot for me, Warsh said. It is not helpful in the conduct of policy. Eighteen of nineteen FOMC participants submitted dots; the range was 3.4 to 4.4 percent with a central tendency of 3.6 to 4.1 percent. The committee statement was 130 words long, down from 341 in March, and removed the phrase possible additional adjustments. The 2026 PCE inflation projection was lifted to 3.0 percent from 2.7 percent, core PCE to 2.9 percent from 2.6 percent, and real GDP growth to 2.1 percent from 1.9 percent. The unemployment projection was held at 4.3 percent.

Why the Dot Flip Matters for the Curve

The March SEP showed a median of 3.4 percent, implying two 25bp cuts by year-end. The June SEP, with a median of 3.8 percent, implies one 25bp hike by year-end. That is a 75 basis point hawkish shift in expected policy over the intermeeting period, the largest since June 2022. The bond market had to absorb it in real time. The 2-year, which is the most rate-sensitive tenors, repriced 8 basis points; the 10-year repriced 6 basis points, the classic bear-flattener pattern. Real yields on 10-year TIPS rose 4 basis points to 2.14 percent, the highest since November 2024. Breakeven inflation held at 2.18 percent, indicating that the entire move was in real rates, not in inflation expectations. The mortgage market, which tracks the 10-year, pushed 30-year fixed rates to 7.21 percent, up from 7.12 percent the prior week.

The Global Central Bank Map Splits in Three Camps

The Fed hawkish dot places the United States at odds with the European Central Bank, which cut 65 basis points to 2.0 percent on April 4, and the Bank of England, which cut 50 basis points to 3.75 percent on May 8. It also places the Fed at odds with the Bank of Canada (2.25 percent) and the Reserve Bank of Australia, which has been cutting slowly to 4.35 percent. The Bank of Japan, by contrast, hiked 25 basis points to 0.75 percent in March and is expected to hike another 25 basis points at its June 18-19 meeting, which would put the BOJ at 1.00 percent. The Banco Central do Brasil, which has been on a tightening cycle to fight inflation, holds the Selic at 14.75 percent, the highest in the G20. The three-camp structure (cutting, tightening, and holding with hawkish skew) will define FX flows for the next quarter. The EUR/USD at 1.0840 already prices a 75 basis point Fed-ECB rate gap by year-end.

What Comes Next in the Two Weeks

The May PCE release on June 27 is the binding test. The Cleveland Fed inflation nowcast projects core PCE at 0.27 percent month over month, 3.2 percent year over year. A print at or above 0.30 percent m/m would validate the new median dot and pressure the long end; a print at or below 0.20 percent m/m would force a rethink. Warsh first post-meeting press conference minutes, due in three weeks, will be parsed for his stance on quantitative tightening. The current passive run-off is $25 billion per month in Treasuries and $20 billion in mortgage-backed securities; the Fed balance sheet stands at $6.83 trillion, down from a $9.0 trillion peak. Warsh has been open to ending the dot plot entirely, in which case the June SEP would be the last one printed under his chairmanship. The market is now trading the policy reaction function, not the rate level, and the policy reaction function just got hawkish.