The Fed held rates steady, the new Chair came out swinging on inflation, and a surprise peace deal is already pulling rates back. Here's the real picture.
Hey y'all! It's your favorite mortgage broker, Biz, bringing you another After the Fed recap.
Kevin Warsh ran his first meeting as Fed Chair, the Fed held rates steady, and Warsh came out swinging on inflation. Bonds had a knee-jerk selloff — but here's the good news: a surprise US–Iran peace deal and falling oil prices are already pulling rates back. Let's break down what happened, why bonds wobbled, and why the path forward still has some bright spots.
The Fed unanimously left rates unchanged in Warsh's debut as Chair. He definitely commanded the room and instilled a lot of confidence, but his message was a bit tougher than we were all hoping for. He's committed hard to that 2% inflation target and even dropped the easing bias, giving us zero forward guidance. Markets were looking for a friendlier tone to push back on those rate-hike fears, but we didn't quite get it.
This was the real spark for the market wobble. Nine Fed members now see at least one rate hike this year, and six of them are actually looking at more than one. Almost none of them see a cut coming soon. Warsh notably didn't post a projection of his own, but the general Summary of Economic Projections showed an upgrade to inflation expectations. That combination is why bonds reacted a bit negatively right out of the gate.
Here's the big bright spot. President Trump and Iran signed a memorandum of understanding that reopens the Strait of Hormuz, and we saw oil drop under $74 a barrel. Falling oil prices are super friendly for inflation and for our bonds, which is a huge reason why rates are bouncing back this morning. One little thing to watch: the deal only guarantees the strait stays open toll-free for 60 days while they iron out the final details — but it's unlikely to push oil much higher in the near term.
The latest reports are leaning very bond-friendly, which I love to see. Pending Home Sales jumped 3.8% in May — way better than expected — showing that housing is still staying really resilient. Jobless claims also fell slightly, and the Cotality rental index rose just 1.4% year-over-year. That's a sharp cooling from last year and exactly the kind of slowdown that helps the whole inflation picture for us.
Today: Cautiously float. Bonds recovered nicely but are still a bit worse than before the meeting. Since markets are closed tomorrow for Juneteenth, we're looking at a calm, low-risk day for any repricing.
15–30 day outlook: Cautiously float unless you'd feel better locking in for protection. Rates might drift slightly lower, but there isn't a ton of room — maybe .125 to .250 better at most.
30+ day outlook / into the rest of 2026: Float. We aren't expecting any big drops, but there's no real fear of rates jumping higher either. With Warsh focusing more on inflation than jobs, the next big employment report might not move the needle as much as usual.
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