Federal Reserve policymakers show support for rate hikes as Warsh reins in guidance

WASHINGTON (AP) — The Federal Reserve kept its key rate unchanged Wednesday yet almost half the central bank’s policymakers said they could support a rate hike later this year.

The unexpectedly aggressive tilt toward higher rates would disappoint President Trump and suggests heightened concerns about persistent inflation among Fed officials.

In an unusually short statement after their two-day meeting, the officials dropped language that had suggested their next move would be to cut the key rate. The brief statement reflects the influence of new chair Kevin Warsh, who was appointed by Trump. Warsh has previously criticized the Fed for commenting too broadly on the economy.

Still, Warsh's 18 colleagues on the Fed’s rate-setting committee sent a clear message in a set of quarterly projections released Wednesday: Nine signaled they supported higher rates this year, with six of those supporting two or more quarter-point increases.

It’s a sharp change from March, when no policymakers penciled in a hike and the committee as a whole forecast one cut in 2026. The change is an acknowledgement that inflation is at its highest level in three years and many officials have said in recent speeches that if inflation doesn’t decline, higher rates may be necessary in the coming months.

Warsh, in his first news conference as chair, also underscored the Fed's determination to bring inflation down to the central bank's 2% target, suggesting he will take a hawkish approach as chair. “Hawks” typically support higher rates to quell inflation, while “doves” often support lower rates to boost hiring.

“We’ve missed (on inflation) for five years and we’re going to fix that,” he said. “When we deliver on our price stability objectives, which we will, the American people will feel as though the hardships that they’ve been living through ... are in the rear view mirror.”

Warsh had supported rate cuts last year while under consideration to be Trump's pick as Fed chair to replace Jerome Powell. Since returning to the White House last year, Trump repeatedly attacked Powell for not cutting rates more deeply.

Warsh did not hint whether he was leaning toward hiking rates, but economists saw his message at the press conference as hawkish.

“The risk that they might need to raise rates has clearly risen given what we got today,” Matthew Luzzetti, chief U.S. economist at Deutsche Bank, said.

Financial markets agreed. Stock prices fell sharply after the Fed issued its statement and Warsh spoke. Bond yields rose.

Trump, for his part, appeared to accept the Fed's decision.

“We have a very good guy over there now so I’m guided by what he wants to do,” Trump said in France, where he attended a meeting of leaders from the world's seven largest economies.

All told, another eight officials signaled they would support keeping the rate unchanged, and one penciled in a cut. Warsh did not submit a forecast for how the Fed might change its key rate.

In another shift, the Fed's post-meeting statement contained no hints about its next moves, or what economists refer to as “forward guidance.” Previous Fed chairs, starting with Ben Bernanke, saw such guidance as a benefit to the Fed, because it prodded financial markets to move rates either higher or lower, depending on what the Fed preferred.

Warsh told reporters at a press conference that guidance was not “well suited to the current policy conjuncture." He has previously criticized forward guidance, as well as the quarterly projections, for potentially locking the Fed into a specific rate path.

Warsh also said he is forming five task forces to examine such areas as how the Fed communicates, the sources of data it uses in making policy decisions, and the frameworks it uses to evaluate inflation, all with the goal of making sure the Fed is “clear-eyed and focused on the future.”

Diane Swonk, chief economist at accounting firm KPMG, said the use of the task forces indicates Warsh is not looking to impose changes on the rest of the Fed, but instead is seeking consensus.

“He wants buy in,” she said. "He’s not trying to change it by command.”

If the Iran war is resolved, gas prices will likely continue to decline and inflation may cool in the coming months. But prices of many goods and services — such as clothes, dental care, and child care — were rising before the Iran war, and inflation has been above the Fed’s 2% target for five years, suggesting that there may still be inflationary pressures in the economy.

Warsh also faces a sharply different economic environment than when he appeared to campaign for the job of Fed chair last year. Back then, he was outspoken in favor of lower interest rates, as Trump has demanded. He pointed to the development of AI as a technology that could vastly expand the economy's ability to produce goods and services cheaply, which would over time bring down inflation.

Even then, many economists were skeptical of his claim. At least in the short run, analysts note that soaring investment in semiconductors and computing equipment is contributing to higher inflation.

Indeed, since the Iran war began Feb. 28, inflation has accelerated to a three-year high of 4.2%, lifted mostly by costlier gas stemming from the Iran war. The Fed typically fights higher inflation by raising its key interest rate to cool spending and growth.

Trump has announced a peace agreement that could bring the three-month conflict to an end, but it's not clear if peace will hold. And even if oil flows freely out of the Middle East again, it could take months for prices of gas, groceries, and items such as airline fares, to cool.

At the same time, hiring has picked up in recent months, removing a key rationale for cutting rates. In January, the Fed forecast that it would reduce rates twice this year, as part of its quarterly economic projections. A big reason for those potential cuts is that employers were shedding jobs and policymakers worried that the unemployment rate would rise. The central bank typically cuts its key rate to spur economic growth and hiring.

But earlier this month a government report showed that hiring jumped in May, when employers added 172,000 jobs, the third straight month of solid job gains.

Federal Reserve Chairman Kevin Warsh speaks during a news conference following the Federal Open Market Committee meeting, Wednesday, June 17, 2025, in Washington. (AP Photo/Rod Lamkey, Jr.)

Federal Reserve Chairman Kevin Warsh speaks during a news conference following the Federal Open Market Committee meeting, Wednesday, June 17, 2025, in Washington. (AP Photo/Rod Lamkey, Jr.)

Federal Reserve Chairman Kevin Warsh speaks during a news conference following the Federal Open Market Committee meeting, Wednesday, June 17, 2025, in Washington. (AP Photo/Rod Lamkey, Jr.)

Federal Reserve Chairman Kevin Warsh speaks during a news conference following the Federal Open Market Committee meeting, Wednesday, June 17, 2025, in Washington. (AP Photo/Rod Lamkey, Jr.)

High winds drove a wildfire into an eastern Washington neighborhood, forcing the evacuation of about 1,500 people and destroying at least 15 homes, officials said Wednesday.

One person was reported missing by a family member but officials were unable to go into the fire zone to search for them because the conditions remained dangerous Wednesday afternoon, Spokane County Sheriff John Nowels said during a press conference.

“They have a location to look but it’s not safe to look there at the moment,” Nowels said.

Many people living in the densely populated neighborhoods had to flee on a moment's notice — sometimes after an officer knocked on their door — leaving behind belongings and in some cases, critical medications, Nowels said. People were being escorted Wednesday by an officer to their homes one-by-one to access those essential needs, but then they were taken back out, Nowels said.

The evacuation order for the 1,500 residents remained in effect Wednesday, said Chandra Fox, deputy director for Spokane County Emergency Management.

“Our concern is for increased winds Wednesday afternoon,” Fox said.

Nowels said 15 homes had been lost in the fire but there had been no injuries or deaths reported.

The blaze started just after noon on Tuesday and quickly moved up a hill, said fire district spokesman Robert Gray. Winds then shifted, sending flames into a neighborhood, Gray said. Spokane is about 280 miles (450 kilometers) east of Seattle near the border with Idaho.

John Leavell, battalion chief with the Spokane Valley Fire Department, was one of the first people to spot the fire. He said he was driving near Interstate 90 when he saw a column of smoke.

“As I approached it, I thought this is going to be a big event — this is going fast,” he said. “It looked like waves of fire going up the hill.”

He pulled into a driveway and found a house fully engulfed in flames, so he contacted surrounding agencies and the local fire district took over while his crew started building fire lines, he said. Leavell said he didn't know if they fire began at the house or quickly consumed it. The cause is still under investigation.

Fire crews from Washington state and Idaho attacked the fire from the ground and air, but it quickly grew to 225 acres (.35 square miles). It was 10% contained Wednesday morning, according to the National Interagency Fire Center. Avista turned off power for the area as the fire progressed for the safety of firefighters. It remained off Wednesday in some areas.

The weather was working in the firefighters’ favor.

Winds were lighter on Wednesday and were expected to decrease after sunset, according to Rachael Fewkes, a meteorologist with the National Weather Service in Spokane. The temperature also dropped a few degrees from the mid-80s on Tuesday to a high of 80 on Wednesday, she said.

The Federal Emergency Management Agency said Wednesday that they authorized the use of Fire Management Assistance Grant funds to help with firefighting costs for the Spokane blaze. The regional FEMA director said the fire had the potential to constitute a major disaster. Besides threatening homes, it also threatened a school, power lines, parks, businesses and wildlife.

FEMA said this was the first fire grant awarded this season to fight a Washington wildfire.

More than 32,000 fires have burned more than 3,900 square miles (10,100 square kilometers) so far this year in the United States, according to the fire center, which coordinates the mobilization of large-scale firefighting efforts.

That’s significantly higher than the 10-year average of just under 24,000 fires burning about 2,200 square miles (5,700 square kilometers) by early June, according to the fire center, even though fire activity has been relatively light in recent weeks.

Weather and fuel models that predict conditions like wind, lightning and how likely plants and other materials are to burn also show an increased danger of fires in multiple areas across the U.S. in coming weeks, according to the fire center. Some regions with critical conditions for fire include portions of California, and the Southwest, Great Basin and Rocky Mountain areas.

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Bellisle reported from Seattle. Associated Press reporter Rebecca Boone contributed to this story from Boise, Idaho.

Fire crews battle the Upriver Fire on Tuesday, June 16, 2026 east of Spokane, Wash. (Spokane Valley Fire Department via AP)

Fire crews battle the Upriver Fire on Tuesday, June 16, 2026, east of Spokane, Wash. (Spokane Valley Fire Department via AP)

This photo provided by Spokane Fire District 9 shows smoke rising from the Upriver Fire burning northeast of Spokane, Wash., on Tuesday, June 16, 2026. (Robert Gray/Spokane Fire District 9 via AP)

This photo provided by Spokane Fire District 9 shows the Upriver Fire burning northeast of Spokane, Wash., on Tuesday, June 16, 2026. (Robert Gray/Spokane Fire District 9 via AP)