The Federal Reserve chose to hold interest rates unchanged at the June Federal Open Market Committee (FOMC) meeting. The past few months, which have seen both higher inflation and a relatively soft labor market, have also created a sense of deadlock and a wait-and-see attitude among the Fed. While the June vote was ultimately unanimous, the latest Fed minutes (recapping the June FOMC) indicate the consensus is not as strong as that vote expects.
The minutes offered a closer look at a division in longer-term outlook about the appropriate state for interest rates. The minutes noted that several of the 19 participants expect current interest rates to remain unchanged or slightly below where they are now by the end of the year, but several others expect higher interest rates. Moreover, several of the voting participants said that there is a case for raising interest rates, though they ultimately agreed to keep rates unchanged.
During the meeting, participants voiced “considerable uncertainty” about the direction of inflation and indicated a close look at how it changes will be needed. One fairly sure expectation, though, was that “a deceleration in housing services prices” was likely to continue to be “a source of disinflationary pressure.”
This was the first FOMC under new Chairman Kevin Warsh, nominated by President Donald Trump and confirmed to the position in May. Warsh’s appointment has been met with criticism (including from Democratic Senators) that Trump selected him because he expects Warsh to cut interest rates, though Warsh has denied any sort of quid pro quo arrangement to that effect.
Fed officials had indicated at a previous FOMC in April that if current economic conditions remain, then interest rate hikes may be needed. That outlook apparently hasn’t changed for at least a portion of the voting participants.
Regular economic reports in June 2026 showed trends are continuing if not escalating. Inflation spiked to a three-year high, believed to have been driven by a delayed response to energy inflation costs by the U.S.-Iran war.
However, job growth also declined in June, which would in theory offer incentive against hiking rates. In reaction to the June jobs report, Realtor.com® Chief Economist Jake Krimmel expressed doubt that the report’s results would override the Fed’s “commitment to taming inflation.”
The June Fed minutes show that at the meeting (before the release of the relevant jobs report), participants found the labor market to be “balanced” and expected it to remain so in the near-term. Low hiring did lead some participants to describe the labor market as “low dynamism,” however.
One cited reason for optimism among participants was, per the minutes, the then-apparent resolution to the U.S.-Iran War. The minutes explicitly noted that markets’ expectation in June for inflation “only moderately higher” than they were at the start of the conflict, suggesting improved consumer outlook on the economy with the conflict apparently in the rearview.
However, since the June FOMC, the conflict has turned hot again, with Trump explicitly saying the ceasefire is “over.” It remains to be seen how soon potential economic ramifications will be felt and to what extent this could shape the decision-making at the next FOMC, scheduled for July 28-29.
