Federal Reserve

• The European Central Bank raised its deposit facility rate to 2.25% on June 11, marking its first rate hike since 2023. • In contrast, the U.S. Federal Reserve is expected to maintain its federal funds rate between 3.50% and 3.75% during its June 16-17 meeting. • This divergence in monetary policy is driven by the U.S. AI boom, leading the Fed to adopt a less hawkish stance than the ECB.

• The Federal Reserve unanimously decided to keep interest rates steady at a range of 3.5% to 3.75% during its first meeting under new chair Kevin Warsh. • Despite the hold, the Open Markets Committee signaled a potential rate hike before the end of the year, citing that economic activity is currently expanding at a "solid pace." • US stock markets reacted negatively to the signal of future tightening, experiencing a drop on Wednesday afternoon.

• Federal Reserve Chair Kevin Warsh is expected to withhold his "dot plot" projection during the June 2026 meeting, while Bank of America reports at least three members may project further rate hikes for the year. • A rate cut is considered implausible due to rising inflation data, with May's wholesale producer prices (PPI) climbing 6.5% year-over-year and consumer prices (CPI) at 4.2%. • Economic uncertainty persists as G7 tariff discussions and fluctuating oil prices create a murky inflation outlook, despite a recent ceasefire providing some downward pressure.

US central bank makes decision in first meeting under new chair and Trump appointee Kevin WarshThe US Federal Reserve left interest rates unchanged for the fourth time this year after its first meeting under new chair, Kevin Warsh, a Donald Trump appointee who has taken over the central bank during a tumultuous time for the US economy.“Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East,” the Fed’s open market committee said in a short statement. “Productivity growth and capital investment are strong. Job gains have kept pace with the workforce, and the unemployment rate has changed little.” Continue reading...

Powell says central bank has been facing ‘stress test’ under Trump, as supreme court weighs decision on Fed governor that president tried to fireSign up for the Breaking News US newsletter emailJerome Powell, the former chair of the Federal Reserve, has warned that a single act of political interference in monetary policy could permanently destroy public trust in the central bank.As Donald Trump’s administration continues to test the Fed’s longstanding independence, Powell said in a speech on Sunday night that the institution was in the midst of a “stress test”. Continue reading...

• Fed Vice Chair for Supervision Michelle Bowman said on May 29 that inflation progress “appears to have stalled,” with total PCE inflation at 3.8% in April and core PCE at 3.3%. • She said the U.S. economy has remained resilient, but noted the labor market is vulnerable to shocks and that growth has slowed since last summer. • The remarks matter because they reinforce the debate inside the Fed over how long to keep rates restrictive while inflation remains above the 2% target.

• Global investment banks are abandoning expectations for a Federal Reserve rate cut this year, signaling a hawkish shift in U.S. monetary policy. • A strengthening U.S. dollar is siphoning critical capital away from Asian markets, threatening their ability to fund development, manage bond yields, and support equities. • This trend mirrors previous instabilities, such as the 1997 Asian financial crisis and the 2013 "taper tantrum," where surging dollar values destabilized regional currencies.