June 18, 2026

The Federal Reserve decided to keep the benchmark interest rate unchanged yesterday, in the 3.50%-3.75% range

International

The Federal Reserve (Fed) announced yesterday its monetary policy decision to maintain the benchmark interest rate in the 3.50%-3.75% range. At the first meeting with Kevin Warsh as chairman, macroeconomic projections were also revised: the Fed lowered its 2026 growth forecast to 2.2% annually, down from the 2.4% expected in March. It also slightly reduced its unemployment estimate to 4.3% from the previous 4.4%, and revised inflation upward to 3.6% year-on-year, compared to the previous 2.7%, while core inflation, which excludes food and energy, is projected at 3.3% versus the 2.7% in March. Consequently, the interest rate projection was also revised upward to an average of 3.8% by the end of 2026, which could imply an increase from the current level.

Warsh emphasized that he does not believe in forward guidance, so his opinion is not reflected in the estimates. He noted that among the changes he projects, the dot plot, which reflects the interest rate estimates of all participants in monetary policy meetings, could be eliminated by the end of the year. He also announced the creation of five working groups to review the Fed's communication, balance sheet, data sources, productivity and employment, and inflation frameworks. He further stated that the Fed would focus on issuing shorter, more direct statements, centered on current data, and stressed that the institution will not change its 2% inflation target.

In this context, the US Treasury yield curve broadened across the board at yesterday's close. Specifically, the 1-year Treasury yield moved from 3.84% to 3.97%, while the 3-year Treasury yield moved from 4.09% to 4.22%. Finally, in the 10-year segment, the variation was from 4.44% to 4.49%.

Meanwhile, the main US stock indices declined on Wednesday. The S&P 500 fell 1.2%, while the Nasdaq saw the biggest drop, falling 1.3%. The Dow Jones Industrial Average declined 1.0% yesterday. Thus, the indices have accumulated year-to-date gains of 8.4%, 12.0%, and 7.1%, respectively.

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