The divergence between a hold-all-year base case and a near-coin-flip December hike probability reflects the genuine uncertainty Warsh has introduced by removing forward guidance. Without a Fed-provided path, each inflation and payrolls print now carries more weight, and the range of analyst outcomes will widen further if energy prices remain volatile. The balance sheet task force ranking second in priority is a signal worth watching: any move toward accelerating quantitative tightening would tighten financial conditions independently of rate action and compound the impact of a December hike if one materialises. AI-driven capital expenditure as a sustaining force for US growth adds a structural dimension to the hawkish risk scenario that goes beyond the current energy shock. The net effect is a rates market that will remain sensitive and prone to repricing on every major data release through the second half of the year.

Earlier:

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Analysts are divided on the Fed’s next move after June’s hold, with one assigning near 50% odds to a December hike and another warning that AI-led growth could prompt tightening next year.

Summary:

• Fed held rates at 3.5%-3.75% at the June meeting; dot plot shifted hawkish with the mean projecting one hike this year
• One analyst maintains a hold through September, assigns roughly 50% probability to a December hike, and sees the possibility of two cumulative hikes by end of 2027
• A second analyst maintains a no-hike, no-cut call for 2026 but warns the risk of a hike in 2027 has risen
• Both note Warsh’s decision to strip forward guidance and simplify the statement, reducing direct Fed-market intervention
• Five task forces announced covering communications, balance sheet, data, productivity and labour, and the inflation framework; the balance sheet review ranked second, signalling quantitative tightening remains a live consideration
• Sustained US growth driven by AI-led capital expenditure flagged as a potential trigger for future tightening

Two securities firms have published diverging but broadly cautious assessments of the Federal Reserve’s policy path following the June meeting, with one placing near-even odds on a December rate hike and the other holding a no-move call for 2026 while flagging rising hike risk into next year.

Both analyses centre on the same set of facts. The Fed left its benchmark rate unchanged at 3.5% to 3.75%, as expected. Chair Kevin Warsh significantly simplified the post-meeting statement, removing forward guidance entirely and signalling that markets should price policy on incoming data rather than Fed projections. Five task forces were announced to examine communications, the balance sheet, data sourcing, productivity and labour, and the inflation framework.

The dot plot delivered the hawkish surprise, with the mean projection pointing to one hike this year, underpinned by firmer employment and persistent inflation.

One analyst maintains that the Fed will hold through September and assigns roughly 50% probability to a December move, with the possibility of two cumulative hikes by the end of 2027. The other holds a no-hike, no-cut view for this year but acknowledges the risk of tightening next year has risen materially, citing AI-driven capital expenditure as a potential source of sustained US growth that could justify future action.

Both flag the task force structure as significant. The balance sheet review ranking second in priority suggests quantitative tightening remains a core policy tilt, one that could tighten financial conditions independently of any rate decision. With forward guidance gone, the burden on incoming data has increased sharply, and the range of plausible outcomes for the second half of 2026 is now unusually wide.