NEWS AND INSIGHTS | INSIGHTS

CIO Notebook: Warsh Walks the Narrow Path to Neutral

June 18, 2026
Shannon Saccocia, CFA, Chief Investment Officer—Wealth

Overall, the Fed's tone was hawkish, with sticky inflation expectations, a resilient labor market, and ongoing geopolitical uncertainty providing cover to remain on hold.

With Kevin Warsh in his first meeting at the helm of the Federal Reserve, the Federal Open Market Committee (“FOMC”) held the fed funds target rate steady at 3.50% to 3.75% in a unanimous decision. The statement, reflecting Warsh’s desire to tighten up the messaging and remove elements of forward guidance, reaffirmed the commitment to the Fed’s dual mandate, but was clearly focused on the need to deliver price stability. In fact, the statement reiterated the commitment to a 2% inflation target – a further amplification of this renewed emphasis. Additionally, the statement included a nod to AI acting as a tailwind for U.S. economic growth, stating that “productivity growth and capital investment are strong,” while acknowledging the elevated uncertainty stemming from the conflict in the Middle East.

The Fed also released its quarterly update of economic projections, which aligned with the tenor of the statement. Core PCE was penciled in at +3.3% for 2026, up from +2.7% in the March meeting, and is expected to come down only to +2.5% in 2027. Growth expectations have drifted lower, from +2.4% to +2.2% this year, likely reflecting the impact of higher energy prices on both consumers and businesses as a result of energy supply disruption. The expected unemployment rate was also ratcheted down, from 4.4% to 4.3% – an indication that the recent stabilization in the U.S. labor market appears sustainable in the minds of the FOMC. These changes translated into a more hawkish dot plot. Nine out of the eighteen respondents now expect at least one rate hike in 2026, with eight expecting no change, and only one anticipating a rate cut. This implies the median dot for 2026 shifted to 3.750% from 3.375%, and, for 2027, the median moved to 3.625%. Important to note, and consistent with previous comments, Chair Warsh did not submit projections.

During the shortened press conference, Warsh reiterated the challenge facing the Fed currently, stating, “We’ve got some work to do on the price stability front.” The unanimous vote to hold rates steady notwithstanding, Warsh admitted that a proposal was raised in the meeting to cut rates but clearly failed to gain support. In our view, the most unexpected part of the press conference was Warsh’s announcement of plans to create four task forces – perhaps in response to calls over the last 18 months for further oversight of and reform within the Fed. These task forces will focus on the following: communications, the Fed’s balance sheet, the use and reliance on existing data sources, and productivity and jobs. They could potentially be populated by parties from both in and outside the Fed.

Overall, the statement and tone of the press conference were decidedly more hawkish. While the prospect of a lasting resolution in the Middle East should ease the upward pressure on energy prices, the voting members of the FOMC appear concerned that this current bout of inflation could prove stickier than initially expected. In addition, the stronger labor market data released over the prior three months provides the Fed with the latitude to adopt a wait-and-see stance, and the announcement of the various task forces could also give Warsh time – and the buffer – he needs to balance the Trump Administration’s desire for lower rates and the Committee’s clear consternation around the path of prices.

IMPORTANT INFORMATION:

This material is provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. This material is general in nature and is not directed to any category of investors and should not be regarded as individualized, a recommendation, investment advice or a suggestion to engage in or refrain from any investment-related course of action. Any views or opinions expressed may not reflect those of the firm as a whole. Neuberger products and services may not be available in all jurisdictions or to all client types. Diversification does not guarantee profit or protect against loss in declining markets. Investing entails risks, including possible loss of principal. Investments in private equity are speculative and involve a higher degree of risk than more traditional investments. Investments in private equity are intended for sophisticated investors only. Unless otherwise indicated, returns shown reflect reinvestment of dividends and distributions. Indexes are unmanaged and are not available for direct investment. Investing entails risks, including possible loss of principal. Past performance is no guarantee of future results.

Portfolio positioning views expressed herein are those of Neuberger’s Wealth Investment Group, which may include those of the Neuberger’s Asset Allocation Committee. Asset allocation and positioning views are based on a hypothetical reference portfolio. The Wealth Investment Group analyzes market and economic indicators to develop asset allocation strategies. The Wealth Investment Group works in partnership with the Office of the CIO. The Wealth Investment Group also consults regularly with portfolio managers and investment officers across the firm. The Asset Allocation Committee is comprised of professionals across multiple disciplines, including equity and fixed income strategists and portfolio managers. The Asset Allocation Committee reviews and sets long-term asset allocation models, establishes preferred near-term tactical asset class allocations and, upon request, reviews asset allocations for large, diversified mandates. Asset Allocation Committee members are polled on asset classes and the positional views are representative of an Asset Allocation Committee consensus. The views of the Asset Allocation Committee and the Wealth Investment Group may not reflect the views of the firm as a whole and Neuberger advisers and portfolio managers may take contrary positions to the views of the Asset Allocation Committee or the Wealth Investment Group. The Asset Allocation Committee and the Wealth Investment Group views do not constitute a prediction or projection of future events or future market behavior. Defensive positioning generally means an underweight bias on allocations to risk assets such as equities and alternatives. Positioning views may change over time without notice and actual client positioning may vary significantly. Discussion of yield characteristics or total returns of different asset classes are for illustrative purposes only. Such asset classes, such as equities and fixed income, may have significantly different overall risk-return characteristics which should be consider before investing.

The information in this material may contain projections, market outlooks or other forward-looking statements regarding future events, including economic, asset class and market outlooks or expectations, and is only current as of the date indicated. There is no assurance that such events, outlook and expectations will be achieved, and actual results may be significantly different than that shown here. The duration and characteristics of past market/economic cycles and market behavior, including any bull/bear markets, is no indication of the duration and characteristics of any current or future be market/economic cycles or behavior. Information on historical observations about asset or sub-asset classes is not intended to represent or predict future events. Historical trends do not imply, forecast or guarantee future results. Information is based on current views and market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons.

Discussions of any specific sectors and companies are for informational purposes only. This material is not intended as a formal research report and should not be relied upon as a basis for making an investment decision. The firm, its employees and advisory accounts may hold positions of any companies discussed. Nothing herein constitutes a recommendation to buy, sell or hold a security. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. Investment decisions and the appropriateness of this content should be made based on an investor's individual objectives and circumstances and in consultation with his or her advisors.

Neuberger Investment Advisers LLC is a registered investment adviser.

The “Neuberger” name and logo are registered service marks of Neuberger Berman Group LLC.