As part of our initiative to bring timely market information to California public agencies, CalTRUST Chief Executive Officer Laura Labanieh Kitson had a brief Q&A with State Street Investment Management’s Vice President, Portfolio Strategist Will Goldthwait to reflect on this week’s Federal Reserve meeting:
Apparently, Chair Warsh arrived, looked around the building and thought, ‘Interesting. Let’s review all of this’.
Laura: What did the Fed do?
Will: As expected, the FOMC left the federal funds target range unchanged at 3.50%-3.75%. Nobody was surprised, which was probably for the best. Markets had spent the last several weeks confidently predicting exactly that, and the Fed graciously decided not to ruin everyone’s spreadsheets.
Inflation remains above target, and the Committee reiterated its commitment to returning inflation to 2%. In other words, the destination remains the same; the route, however, is still under construction.
Laura: Did Chair Warsh change the Fed’s message?
Will: Yes—but mostly in style rather than substance. Chair Warsh’s debut was noticeably different from the Powell era. Gone were the 45-minute attempts to explain every possible outcome under every conceivable scenario. Warsh was concise, direct and repeatedly emphasized that the Committee is “unambiguously and unanimously” committed to 2% inflation. His initial statement was ½ the length of April’s. We all love brevity.
Perhaps most importantly, he seemed less interested in providing markets with an itinerary for the next twelve months. Investors looking for detailed clues were politely informed that they will simply have to do some of their own work again. Thoughts and prayers.
Laura: Were there any surprises?
Will: Actually, yes. The biggest surprise wasn’t the rate decision. It was the announcement of several task forces that will review nearly every major aspect of the Federal Reserve. These groups will examine:
- Communications and forward guidance. (Bye bye dots?)
- The balance sheet and operating framework. (Smaller?)
- Data and inflation measurement. (Real time data… gasp…)
- Productivity and structural changes. (AI anyone?)
- The inflation framework itself. (Is 2% still going to be 2%?)
Apparently, Chair Warsh arrived, looked around the building and thought, “Interesting. Let’s review all of this.” To be fair, central bankers love committees. Creating task forces is probably their equivalent of buying a new set of golf clubs. Whether they actually improve performance remains to be seen.
Laura: What was the most important takeaway for markets?
Will: Markets may need to rediscover an old and somewhat unpleasant concept known as uncertainty. For years, the Fed provided increasingly detailed forward guidance. Investors became accustomed to receiving enough clues to practically pre-order the next rate decision.
Chair Warsh appears less enthusiastic about that arrangement. His message was straightforward: “We’ll see the data, then we’ll decide.” Which, oddly enough, is how monetary policy used to work. The downside is more volatility. The upside is that the Fed is less likely to promise something in June that looks foolish by October—which, as history has shown, can happen from time to time.
He also hinted at fewer press conferences. Noting they are important when there is something to say. There was clearly something to say today.
Laura: Which task force matters most?
Will: For fixed-income investors, the balance sheet task force is the main event. This review could ultimately address:
- The size of the Fed’s balance sheet.
- The ample reserves framework.
- Quantitative tightening.
- Reserve balances.
- Repo markets.
- Treasury bill supply.
- Money market dynamics.
Translation: front-end investors should pay much closer attention to this than to whether the next rate move is 25 basis points earlier or later. After all, a quarter-point move comes and goes. Rewriting the plumbing of the financial system tends to stick around.
Laura: What is your overall assessment?
Will: Today’s meeting represented a change in tone, not a change in policy. Warsh looked comfortable, disciplined and surprisingly unconcerned with providing a running commentary on the future. He projected confidence without sounding overly eager to become the main character. Most notably, he announced several strategic reviews that suggest he is thinking not merely about the next meeting, but about what the Federal Reserve should look like over the next decade.
In some respects, it felt like a new CEO taking over a mature company. The first day wasn’t spent announcing layoffs or changing prices. Instead, he assembled five committees and asked everyone to reexamine the mission statement.
Corporate consultants everywhere nodded approvingly. And somewhere, buried deep inside the Eccles Building, a dozen economists just learned they have been voluntold to join another committee.
Source: Federal Reserve, as of June 17, 2026