No Cuts in H1: The Fed Stays on Hold Through Summer
Final Outcome Score
Successful
4/10/2026
90 days
4/10/2026 - 7/9/2026
7/9/2026
Conclusions
The Fed held rates at 3.5–3.75% through both the May and June 2026 FOMC meetings, delivering zero cuts in H1 as predicted. The June meeting under new chair Kevin Warsh was unanimous (12-0 hold), with the dot plot shifting any cuts to 2027–2028. Sticky core CPI (2.9% YoY) and a resilient labor market (4.2% unemployment) gave the Fed no cover to cut.
Thesis Details
The Event
In April 2026, markets were pricing in two to three Fed rate cuts in the first half of the year. Inflation in shelter and services was proving stubborn, and tariffs threatened to push consumer prices higher. Unemployment sat near 4.2%. The Fed's next decisions were at its May and June meetings.
Our Hypothesis
The Fed delivers zero rate cuts in H1 2026 (no cut at the May or June FOMC meetings) as sticky core inflation, tariff pass-through, and resilient labor markets force Powell to stay on hold longer than markets currently price in.
Our Rationale
The market at thesis inception was pricing 2–3 Fed cuts for H1 2026, a view that required both CPI returning to target and growth softening simultaneously — neither of which the data supported. Shelter and services inflation were proving persistently sticky, tariff pass-through was adding a new upside CPI risk the Fed couldn't credibly ignore, and with unemployment near 4.2%, the political and empirical case for easing was weak. The Warsh-era Fed's hawkish posture raised the bar for any dovish pivot beyond what markets were discounting.
Tags
Measurable Data Points (5)
Federal Funds Rate
Rate • fred (FEDFUNDS)
Target
Above 4.5
Current Value
3.63
Last Updated
7/4/2026
Core CPI YoY
Rate • fred (CPILFESL)
Target
Above 3
Current Value
2.9
Last Updated
6/12/2026
Unemployment Rate
Rate • fred (UNRATE)
Target
Below 4.5
Current Value
4.2
Last Updated
7/3/2026
2-Year Treasury Yield
Rate • fred (DGS2)
Target
Above 4
Current Value
4.21
Last Updated
7/9/2026
10-Year Treasury Yield
Rate • fred (DGS10)
Target
Above 4.25
Current Value
4.58
Last Updated
7/9/2026
How we score: Each data point is evaluated as "met", "on track", "off track", or "failed" based on its current value vs. target. The overall confidence score is calculated as the percentage of data points that are "met" or "on track". When a thesis is closed, the final outcome score only counts "met" data points.