Fed easing outlook fades as Kashkari may shift toward a hawkish stance

Huo Xing Finance reports that on June 4, as the Fed’s upcoming monetary policy meeting approaches, market expectations for a rate cut have continued to cool. Reuters columnist Mike Dolan noted that the last remaining expectation of a single rate cut this year may be entirely removed, and there is even a possibility that new Chair Kevin Warsh could push to eliminate the dot plot mechanism altogether. Currently, the AI investment boom and geopolitical tensions in the Middle East have pushed up energy prices, reigniting inflationary pressures, while the U.S. labor market remains resilient—private sector employment increased by 122,000 in May, exceeding forecasts. Markets have begun pricing in the possibility of a rate hike this year. The report suggests that an immediate rate hike is not expected at this meeting, but the policy statement may further downplay any dovish tilt. Several officials have previously proposed removing related forward guidance, and even former dove Waller has recently shifted toward a more hawkish stance. Tim Duy, economist at SGH Macroeconomics, said the Fed is reassessing last year’s rate-cut decisions, with an increasing number of officials beginning to lay the groundwork for future rate hikes. Meanwhile, Warsh’s appointment of conservative economist Paul Winfree—who has advocated weakening the Fed’s employment mandate—as an advisor has intensified market concerns about his hawkish orientation. Analysts believe that as expectations for monetary easing recede, the Fed’s policy cycle may have already turned. Volatility in U.S. Treasuries and interest rate markets could significantly intensify in the second half of the year.