Nine policymakers now project at least one rate hike by the end of 2026, and dow jones stock markets got the message this week as the Federal Reserve released a new dot plot. The Fed still held rates at 3.50% to 3.75%, but the forecast shift points away from the March path of cuts.
Kevin Warsh and the dots
Nine of the 18 other members of the Federal Open Market Committee projected higher rates, while the other nine said rates would be unchanged or lower to end 2026. Six policymakers went further and saw multiple hikes in the offing, a sharper split than the March outlook, which had called for one rate cut in 2026 and two cuts by the end of 2027.
Kevin Warsh, the new Fed chairman, said he had stayed out of the exercise. “I, however, have refrained from offering any projections of my own, consistent with my long-held views.”
Warsh's forward guidance break
Warsh told lawmakers during his confirmation, “I don't believe in forward guidance.” He also said, “The Fed tells the whole world what their dots are going to be, what their forecasts are going to be [and] then they hold on to those forecasts longer than they should.”
The Fed dropped language from its March policy statement that had signaled its next move would be to cut rates, and Warsh announced, “There will be a review about communications broadly, press conferences, dots, meetings, and the like.” Gregory Daco said, “I think this might be the last time we see the dot plot.”
2012 dot plot under review
The dot plot has been the Fed's quarterly forward guidance exercise since 2012, and Warsh has signaled he may seek to limit or phase it out, though that would require committee consensus. The immediate issue for rate markets is simpler: the median forecast for end-2027 stays at 3.50% to 3.75%, but the balance of projections now leans more toward hikes than cuts.
If that split holds, the message to borrowers and traders is that the Fed's internal path is no longer centered on easing. The next read on the committee's communication strategy will come through Warsh's review, not through another line in a statement.
