CITIC’s hold call pushes against the market’s current lean toward an October hike, creating a divergence worth monitoring as the US-Iran MOU beds in and energy-driven inflation pressure eases. If the geopolitical premium in oil continues to unwind, the inflation case for hiking weakens and the roughly 50-50 FOMC split that currently gives hike risk its credibility may shift toward the chair’s position. The removal of forward guidance means markets must now read incoming data rather than Fed signals, adding volatility to rate pricing around each CPI and payrolls release. White House political dynamics add a further layer of complexity: a Fed that hikes into an election-sensitive economy risks friction with the administration, a consideration CITIC explicitly factors into its call.

CITIC Securities maintains its call for the Fed to hold rates unchanged through 2026, arguing Warsh faces political constraints and that the US-Iran deal will ease the inflation pressure driving hawkish dot-plot bets.

Summary:

• Fed held rates at 3.5%-3.75% at the June meeting, as expected
• Warsh shortened the statement and stripped forward guidance, telling markets to price on incoming data
• Dot plot delivered a hawkish shock; FOMC currently split roughly 50-50 on whether to hike this year
• CITIC argues Warsh will not support a hike given White House political constraints and easing energy inflation pressure from the US-Iran MOU
• The committee split is expected to converge toward the chair’s position
• CITIC maintains its call for rates to remain unchanged through the end of 2026

CITIC Securities is maintaining its call for the Federal Reserve to hold its policy rate unchanged through the remainder of 2026, arguing that Fed Chair Kevin Warsh faces a combination of political constraints and fading inflation pressure that will prevent the hawkish dot plot from translating into an actual hike.

The Fed left its benchmark rate in a range of 3.5% to 3.75% at the June meeting, in line with expectations. Warsh used the occasion to strip the post-meeting statement of forward guidance and cut it to around 130 words, explicitly directing markets to price policy on incoming economic data rather than a Fed-provided path. The move acknowledged that current data are lagging and that the policy signal should come from conditions rather than committee projections.

The dot plot nonetheless delivered a hawkish surprise, with the median year-end funds rate projection rising to 3.8% and the committee splitting roughly 50-50 on whether a hike is warranted this year. Market pricing shifted toward an October move. CITIC’s analysis takes a different view.

The firm argues that progress toward the US-Iran memorandum of understanding should ease the geopolitically driven energy and inflation pressures that have provided the primary justification for tightening. With that tailwind for hawks fading, and with Warsh operating under political constraints from the White House, CITIC does not expect the chair to throw his weight behind a hike. Given that FOMC splits historically tend to converge toward the chair’s position, the firm sees the 50-50 split as unstable and likely to resolve in favour of a hold.

CITIC therefore keeps its year-end rate call unchanged: no move in 2026.