The Federal Reserve kept its benchmark federal funds rate unchanged at 3.50%-3.75% on Wednesday, a widely expected decision. However, the accompanying policy statement and updated economic projections took a hawkish turn, signaling a tilt toward hiking rates later this year. Policymakers now project higher interest rates through at least 2028, with the fed funds rate expected at 3.8% by end of 2026 (up from 3.4% in March) and remaining elevated at 3.6% in 2027 and 3.4% in 2028. They also anticipate stickier inflation, with PCE inflation rising 3.6% this year and core PCE at 3.3%, compared to 2.7% forecasts in March. Bitcoin dropped from about $66,000 to $64,800 after the announcement, later stabilizing around $65,300. Both the S&P 500 and Nasdaq 100 declined nearly 1%, erasing earlier gains. This was the first Fed meeting chaired by Kevin Warsh, who succeeded Jerome Powell last month. Markets had already dialed back rate cut expectations due to persistent inflation and resilient labor data, with traders now seeing a growing chance of a rate hike instead. All eyes are on Chair Warsh's press conference for clues on potential shifts in communication strategy, as he has previously criticized the Fed's use of forward guidance and the dot plot. Investors will gauge whether the central bank will alter its policy communication under his leadership.

Key facts

• Fed holds rates at 3.50%-3.75%, signals hawkish tilt with higher rate projections.
• Bitcoin falls from $66,000 to $64,800; S&P 500 and Nasdaq drop nearly 1%.
• New Chair Kevin Warsh holds first post-meeting press conference.
• Markets now see possible rate hike instead of cut amid persistent inflation.
• Policymakers expect stickier inflation: PCE 3.6%, core PCE 3.3% in 2026.

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