June FOMC: Hawkish guidance

Research evidence excerpt

June FOMC: Hawkish guidance

Accessible version

Situation Room

Credit Analysis

June FOMC: Hawkish guidance 17 June 2026

Chair Warsh’s inaugural FOMC press conference and the SEP (Summary of Economy Credit Strategy

Projections) were much more hawkish than expected. For IG credit, the impact is a bit of United States

a wash. Positives: higher rates with still a benign level of rates volatility should be Cross Product

supportive of domestic demand. Given the big flattening of the Treasury yield curve, Yuri Seliger

(Exhibit 2) the front-end should benefit the most. That is especially true given that front Credit Strategist

end has underperformed significantly since the start of the Iran war on heavy supply and BofAS+1 646 855 7209

more back-end demand (Exhibit 5, Exhibit 6). yuri.seliger@bofa.com

Sohyun Marie Lee

Negatives: 1) the flatter Treasury yield curve is negative for foreign demand, as FX Credit Strategist

BofAS

hedging costs go up more than yields. 2) Lower stocks are negative for spreads. But that +1 646 855 7217

impact is muted by the already elevated valuations and a strong earnings outlook. sohyun.lee@bofa.com

An impactful FOMC

In this reportChair Warsh spent a considerable amount of time arguing against forward guidance,

which was removed from the slim FOMC statement. However, the SEP still managed to Daily supply snapshot

deliver forward-looking guidance, with 9 out of 18 dots projecting hikes in 2026. Chair

Warsh also argued for data to drive market expectations, not the Fed reaction function. Daily dealer inventories update

The data has been quite hawkish, with core PCE inflation running at the highest level

Daily HG fund flows

since 2023 (Exhibit 1), although 2yr inflation swaps have declined notably from the peak