Persistent inflation has emerged as the dominant force shaping expectations for Federal Reserve policy, with the May 2026 CPI rising 4.2% year-over-year—the highest reading in three years—driven largely by energy prices amid geopolitical tensions. The FOMC’s June 16-17 meeting, Kevin Warsh’s first as chair, left the federal funds rate unchanged at 3.50%-3.75%, consistent with the pause maintained since the December 2025 cut, while the updated dot plot shifted hawkishly: the median year-end 2026 projection rose to 3.8%, implying limited room for easing or even a possible hike. Solid economic growth and an unemployment rate showing little change have further reduced the urgency for monetary accommodation. Traders are now focused on upcoming data releases, including the July CPI and the July 28-29 FOMC meeting, for signals on whether inflation momentum will ease enough to reopen the door to cuts later in the year.