Goldman: No Hike and No Guidance

We had expected that most FOMC voters would not want to hike today because the June inflation data showed substantial improvement relative to prior months... While Warsh downplayed the role of the June CPI report in today’s decision, we suspect that was the thought process for most of the other eight voters who preferred to leave the funds rate unchanged today.

Warsh made several comments during his press conference that we interpreted as dovish, consistent with his vote to leave the funds rate unchanged:

- he appeared to downplay AI-related price pressures, though somewhat subtly;- when asked if the rise in real interest rates was a signal that the market thought the Fed should hike, he connected it instead to the recent strength of the economy;- Warsh hinted a couple of times that the rise in market interest rates could substitute for a rate hike, though without ever saying it explicitly; and- asked if the Fed needed to raise interest rates to lower inflation by reducing demand, he acknowledged that “interest rates could be part of that solution,” but then suggested that more credibly committing to the inflation target could help to lower inflation by lowering inflation expectations.

We continue to expect that softer core inflation in coming months will keep the Fed on hold for the remainder of 2026.