The big story last week was Kevin Warsh’s debut as Federal Reserve Chairman. The Federal Open Market Committee voted unanimously to hold the federal funds rate steady at 3.50–3.75%, a result few were surprised by. What did catch markets off guard was the updated “dot plot” of rate projections, which showed a meaningful shift in thinking among committee members — nine of 18 now favor at least one rate increase before year-end, compared to just three months ago when the average member was projecting a rate cut in 2026. In a notable move, Warsh declined to submit his own rate projection, signaling his broader skepticism of “forward guidance” as a policy tool. In his press conference, he used the phrase “price stability” roughly a dozen times and announced the formation of five internal task forces to review how the Fed communicates, manages its balance sheet, and approaches inflation — suggesting the institution itself is in for a significant overhaul under his leadership.
Also on Wednesday, the Commerce Department released May retail sales data, and the numbers came in well above expectations. Total retail and food services sales rose 0.9% for the month, nearly double what economists had forecasted, and were up 6.9% compared to May 2025. The so-called control group, which strips out autos, gas, building materials, and food services and is closely watched as an input for GDP calculations, rose 0.7%. On the surface, it’s a picture of a resilient consumer. But economists were quick to add context. Much of the spending boost was supported by larger-than-usual tax refunds this spring, a tailwind that is now fading. Inflation has also been outpacing wage growth, and the personal savings rate has dropped to a four-year low. The May retail report showed Americans are still spending, but the question heading into summer is whether that momentum holds once the tax refund effect wears off.
This Week
The calendar is relatively light this week, but there is one data point that matters. On Thursday the Bureau of Economic Analysis releases the May PCE (Personal Consumption Expenditures), the Federal Reserve’s preferred measure of inflation. Given the hawkish tone Warsh set at last week’s press conference, this number will carry extra weight. A reading that comes in hot would add further credibility to the case for a rate hike later this year. A softer print could give the Fed some breathing room. We’ll also be watching for any updates out of Switzerland, where U.S. and Iranian negotiators are working to formalize the terms of last week’s Memorandum of Understanding. Progress there, or lack thereof, will continue to influence oil prices, which remain one of the most direct drivers of where inflation goes from here.
As always, please reach out with any questions.
Written by: Chris Wasson, CFP®
Sources:
CNBC – Five Takeaways from Warsh’s First Fed Meeting
U.S. Census Bureau – May 2026 Retail Sales
Reuters – Strong U.S. Retail Sales
Kiplinger – Week of June 22–26 Economic Calendar
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