Fed Holds Interest Rate Steady, Year-End Rate Hike Expectations Strengthen

The US Federal Reserve kept the policy interest rate steady at 3.5%-3.75% as expected and reinforced the possibility of a rate hike by the end of the year. Following the decision, global markets showed weakened risk appetite, with notable movements in oil prices and bond yields.

Scraper SystemJune 18, 2026, 10:58 AM

Fed Holds Interest Rate Steady, Year-End Rate Hike Expectations Strengthen

The US Federal Reserve kept the policy interest rate steady between 3.5% and 3.75%. The decision was unanimous, emphasizing that inflation remains above the target.

The statement noted that supply shocks, particularly in energy and some other sectors, continue to push prices upward. The institution reiterated its commitment to maintaining price stability.

The post-meeting statement was notably shorter and simpler compared to previous ones. The removal of language hinting at future rate cuts dampened risk appetite in global markets.

The Fed raised its year-end interest rate forecast from 3.4% in March to 3.8%. The 2027 forecast increased from 3.1% to 3.6%, and the 2028 forecast rose from 3.1% to 3.4%.

These revisions suggest that the possibility of a rate hike in 2026 remains on the table. The dot plot showing FOMC members' expectations indicated that 9 out of 18 officials foresee at least one rate increase this year.

Inflation forecasts were raised from 2.7% to 3.6% for this year, and from 2.2% to 2.3% for 2027. The inflation expectation for 2028 remained at 2%.

Growth projections were lowered from 2.4% to 2.2% for this year. The 2027 growth forecast remained steady at 2.3%, while the 2028 forecast was raised from 2.1% to 2.2%.

The unemployment rate forecast was adjusted down from 4.4% to 4.3% for this year. Estimates for 2027 and 2028 remained at 4.3% and 4.2%, respectively.

Fed Chair Kevin Warsh stated at the press conference that inflation remains well above the 2% target. He emphasized a clear and united stance on price stability and noted that forward guidance was not included in the statement.

Warsh also mentioned that he did not provide his own forecast due to the current approach. The future of the Fed's dot plot system also became a topic of discussion in the markets.

Markets have started pricing in the possibility of a Fed rate hike in October. Previously, December had been the focus, but the decision statement and projections have brought this expectation forward.

On the geopolitical front, Pakistan's Prime Minister Shahbaz Sharif announced that the US and Iran electronically signed the 'Islamabad Accord.' He said an official ceremony to begin technical talks will be held in Switzerland on June 19, 2026, with Qatar also supporting the process.

Following this development, Brent crude oil prices fell by 1% to $77.7 per barrel. The US 10-year Treasury yield stabilized around 4.45%, while the dollar index remained flat near 100.2.

Gold prices rose 1.4% to $4,316 per ounce. The Dow Jones, S&P 500, and Nasdaq indices closed the day lower on the New York Stock Exchange.

In Europe, easing geopolitical risks and expectations that the energy shock may be behind them supported buying. Inflation in the UK came in below expectations, focusing attention on today's Bank of England decision.

Annual consumer inflation in the Eurozone was 3.2% in May. European Commission President Ursula von der Leyen said a free trade agreement between the EU and India is targeted to be signed by the end of the year.

European Commission Vice President Teresa Ribera stated that cross-border bank mergers should be encouraged for a more integrated financial market. BMW shares plunged sharply after the company commented on weak demand in China.

Asian markets showed a mixed picture. Buying in chip manufacturers and AI companies in Japan and South Korea lifted indices, while losses were seen in China and Hong Kong.

Internet companies in Hong Kong came under pressure as investor interest shifted to AI and software stocks in Japan, South Korea, and Taiwan. Reports that China is pressuring investment flows into Hong Kong increased concerns about capital outflows.

On Borsa Istanbul, the BIST 100 index closed down 0.50% at 14,421.15 points. The USD/TRY opened higher in the interbank market.

In the US, the 9-year legal process against Halkbank ended after a court approved dropping the penalty case. Domestically, short-term external debt, housing sales, the Central Bank of Turkey's Monetary Policy Committee meeting summary, and weekly money-bank data will be monitored today.

Source: Anadolu Ajansı

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Fed Holds Interest Rate Steady, Year-End Rate Hike Expectations Strengthen