Warsh’s First Fed Meeting Offers No Relief for Working Families
Warsh’s First Fed Meeting Offers No Relief for Working Families
Central bank holds interest rates steady as inflation and lasting high prices squeeze consumers
Today, the Federal Reserve held the federal funds rate steady at 3.50% to 3.75%. The first rate decision under Chairman Kevin Warsh comes as Americans continue to face elevated inflation, record-low consumer sentiment, and growing economic uncertainty. Alongside the decision, the Federal Reserve released its latest Summary of Economic Projections, which shows the Fed is expecting higher inflation, slower GDP growth, and fewer rate cuts this year. The updated forecast signals continued economic headwinds for households already struggling with the rising price of everyday necessities.
Groundwork’s Chief Economist Breyon Williams shared his reaction:
“Trump installed Kevin Warsh as Fed Chairman for one simple reason: to do his bidding at the head of what should be our independent central bank. Warsh’s first meeting comes amidst slowing growth and rising inflation, which are driving consumer sentiment to record lows. With his puppet now installed at the helm of the Federal Reserve, it’s no wonder Americans have lost faith in Trump to salvage his faltering economy.”
BACKGROUND
Inflation remains well above the Federal Reserve’s target. The Fed’s decision to hold interest rates steady reflects continued concern that inflation is not yet under control.
- The Federal Reserve sharply raised its inflation outlook, now projecting PCE inflation at 3.6% in 2026, up from 2.7% in March. Core inflation was also revised higher, from 2.7% to 3.3%.
- The Federal Reserve’s preferred inflation measure, core Personal Consumption Expenditures (PCE) inflation, rose 3.3% over the past year in April, while overall PCE inflation increased 3.8%. Both remain well above the Fed’s 2% inflation target.
Signs of labor market weakness are becoming increasingly difficult for the Federal Reserve to ignore. While headline job growth remains positive, a range of indicators suggest that employment conditions are deteriorating beneath the surface.
- The hiring rate fell to 3.2% in April, below every month of the 2014-2019 economic expansion.
- The U-6 underemployment rate, which captures workers unable to find full-time jobs and those marginally attached to the labor force, has risen to 8.1%, up from 7.8% a year ago.
- The share of unemployed workers who have been out of work for 6 months or longer climbed to 27.5% in May, the highest since December 2021 and up sharply from 20.4% a year ago. Nearly 2 million Americans are now experiencing long-term unemployment, a sign that those who lose their jobs are finding it increasingly difficult to find another job.
The economy is expected to lose momentum.
- The Summary of Economic Projections shows the Fed downgraded its forecast for economic growth this year to 2.2%, from 2.4% in March, leaving families to face rising prices and a weakening economy at the same time.
The Fed’s rate projections point to continued high borrowing costs for families.
- The Fed’s interest rate projections signal officials expect to hold rates higher for longer. The federal funds rate is projected to be at 3.8% by the end of 2026, up from 3.4% projected in March, implying fewer rate cuts this year. Nine of the Federal Reserve’s 18 participants anticipate at least one rate increase this year, including six who project multiple hikes. This keeps borrowing costs elevated for families carrying mortgages, credit card balances, and auto loans.
