The Fed Put Just Died on June 17

On June 17, the new Fed Chairman stepped up to the microphone. He cut the Fed's statement in half. Then he ended it with five flat words. "The committee will deliver price stability."

I can't stop thinking about this.

If you moved money into long bonds last year, this matters. If you bought REITs or utilities for the dividend, this matters. Most folks made those moves thinking rate cuts were coming in 2026. They're not. And most of Wall Street still hasn't caught up.

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Here's what worries me.

Kevin Warsh is the new Fed chair. He's been in the job a few weeks. On June 17, he held his first press conference. He said "price stability" about a dozen times in one hour. One line of his stuck with me. He said the "two" in their 2% target sits to the left of the decimal. For now, the "zero" is to the right. That's a man saying he wants inflation under 1%. Maybe a lot lower.

Then he did something I've never seen.

The Fed gives each top official a dot on a chart. The dot shows where they think rates will go. It's a Fed ritual. Warsh refused to put his dot down. He won't show his hand. He's the chairman, and he won't tell the world where he wants rates.

Read between the lines. He doesn't want a number tying him down. He wants room to hike hard if he needs to.

Nine of the eighteen officials projected rate hikes by year-end. Half the committee. And here is the part most folks missed.

They want to hike even if the job market gets weaker.

For forty years, the rule was simple. The Fed only raised rates when jobs were too hot. Too many jobs, too much wage growth, too much spending. That rule just died on June 17. Half the room is willing to hike into a slowdown.

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I don't think most people realize what that means.

Five days later, Bank of America changed their forecast. They had said no rate changes in 2026. Then they flipped. Now they see three hikes. September. October. December. That would push rates from 3.75% to 4.5%. Deutsche Bank followed with a two-hike call. More banks will fall in line.

The market is still asleep.

The market is pricing in less than half of what BofA now expects. But smart money is starting to move. One tool tracks the odds of a December hike. Two weeks ago, the odds sat at 61%. Today, 88%. That shift happened in less than ten days.

Eighty-eight percent. That's the number I want you to remember.

I get it. The Fed has saved the market every time it broke. Folks even gave it a name. The "Fed put." Buy stocks, the Fed catches you. Buy bonds, the Fed catches you. That was the deal for twenty-five years. Greenspan. Bernanke. Yellen. Powell. They all played the same game.

That deal is gone.

Warsh told the world in plain English on June 17. He's not here to save your portfolio. He's here to kill inflation. He'll take the pain to get it. And nobody knows how deep that pain will go.

If you own long-dated bond funds, take a hard look this week. If you own utilities for the yield, look at those too. Same with REITs. These all do badly when rates go up. They all do well when rates go down. Most folks loaded up on these last year, betting on cuts. They may be positioned for the wrong story.

I keep coming back to those five words. The committee will deliver price stability. Not "we'll try." Not "we hope." Deliver. Like a package on your doorstep.

The old Fed wanted to be your friend. This Fed wants to crush inflation. Your 401(k) is not its problem.

The Fed put died in that room on June 17. Most folks won't know it died until they open their statement at the end of the year and see the damage. By then, it's too late to do much about it.

More on this tomorrow.

— Lauren
Editor, American Ledger

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