Sunday Start | What‘s Next in Global Macro: New Chair, New Chapter

Research evidence excerpt

Sunday Start | What‘s Next in Global Macro: New Chair, New Chapter

Global Idea

June 21, 2026 06:00 AM GMT

Morgan Stanley & Co. LLCMSunday Start | What's Next in Global Macro Seth B Carpenter

Chief Global Economist

New Chair, New Chapter Seth.Carpenter@morganstanley.com +1 212 761-0370

Kevin Warsh’s first meeting as Fed Chair marked a new chapter. Chair Warsh

intentionally gave little guidance on the path of monetary policy; he has said that

reducing “forward guidance” is central to his philosophy. He highlighted important

forthcoming changes, but as with the policy rate, he did not specify the likely path.

The market’s expectations for a rate hike this year were reinforced by the statement

and Warsh’s press conference. The blunt statement that “[t]he Committee will

deliver price stability” seems clear, but (again…by design) the path was not laid out.

Before determining when the Fed will hike rates and by how much, consider the

following. Chair Warsh did not write down his own projection for the policy rate.

The median FOMC participant expects only one hike this year, but with the addition

of that one dot, the median could have been no hikes.

Moreover, that policy path was plotted alongside a forecast of 3.3% core inflation

for 2026. But the boost to prices from tariffs is largely complete, so we expect

notable disinflation for the remainder of the year. Oil prices are sharply lower, so

the risk of “second-round” inflation from energy seems to have receded markedly.

The FOMC’s inflation forecast is plausible, but not the most likely. If inflation

materially undershoots, the fact that the median participant expected to cut rates

next year presents a puzzle. Why hike rates only once if inflation undershoots and

you expect to cut rates anyway?