Global Credit Bullets | Monday, 22nd June 2026

FED – Hawkish debut, less forward guidance

Last week, the Federal Reserve kept rates on hold at 3.50%–3.75%, in line with expectations. Kevin Warsh delivered a solid and credible first appearance, but the combination of his tone and higher inflation projections triggered a hawkish market reaction, with front-end rates moving more than 10bps higher. However, concerns around Federal Reserve credibility moderated after the press conference. Long-end rates rallied and long-term inflation expectations eased, also helped by developments in the Middle East. Still, meaningful changes appear to be in the pipeline for the FED. The shorter statement may be only the first signal of a broader shift in communication strategy.

Warsh did not provide a dot plot and stressed that he wants markets to react to incoming data rather than to the Fed’s reaction function. This points to a new approach to monetary policy, with the FOMC becoming less constrained by forward guidance. As a result, higher front-end volatility should be expected. With the July meeting priced at just below a 50% probability of a hike, a full hawkish shift could unsettle rates markets and provide fresh fuel for another strong leg higher in the dollar.

UK – Starmer resigns, leadership race begins

Last Thursday, Andy Burnham won the highly anticipated Makerfield by-election, securing a seat in Westminster and adding further pressure on Keir Starmer. The political pressure culminated on Monday morning, with Starmer announcing his resignation and signalling that Labour will have a new leader before September. Market reaction was very muted, as the outcome had been largely anticipated, with investors already pricing in a leadership transition. The key question now is who will take over from Burnham, Miliband and Streeting, and, more importantly, whether the next Labour leader will maintain policy continuity by keeping Rachel Reeves and the existing fiscal rules in place, or shift toward a looser fiscal stance that could unsettle markets. Fiscal pressures remain high in every scenario, from energy support to defence spending, meaning any additional spending would likely require either tweaking the fiscal rules or raising taxes again. For now, the transition looks orderly, but any sign of a break with Reeves’s fiscal framework would risk bringing gilts and sterling back into focus. Against this political backdrop, the BoE left rates unchanged last week, as expected, while keeping its guidance broadly unchanged. If economic data continues to weaken and the labour market remains soft, the Bank will be caught between rising political uncertainty and deteriorating macroeconomic momentum.

Central Banks – Different reaction functions

Last week’s central-bank decisions showed a world moving at different speeds. Brazil cut rates by 25 basis points to 14.25%, continuing its gradual easing cycle as very high real rates still provide room for calibration. However, the BCB is not fully free to turn dovish: sticky inflation expectations, fiscal risks and a resilient economy mean that the easing cycle is likely to remain cautious and data dependent.

Japan moved in the opposite direction. The BoJ hiked rates by 25 basis points to 1%, continuing its normalisation process as yen weakness continues to put pressure on policymakers and intervention alone is not enough. Elsewhere in Asia, Indonesia and the Philippines also hiked defensively, adding another layer of protection against FX weakness after the sharp currency hit seen earlier this year. Overall, the message is clear: while some central banks can still cut thanks to restrictive real rates, others are being forced to tighten to defend credibility, currencies and inflation expectations.

Algebris Investments’ Global Credit Team