BofA explains the basics of Fed watching in World Economy News 22/06/2026 BofA Securities published a primer on June 14 that laid out the fundamentals of “Fed watching,” covering the central bank’s mandate, voting structure, communication tools and balance sheet. The Federal Reserve operated under a dual mandate of maximum employment and stable prices, the bank said, with price stability defined as a 2% inflation target based on the personal consumption expenditures index. BofA said rate hikes tended to lower inflation but raise unemployment, creating short-run trade-offs that became especially difficult during supply shocks. The Federal Open Market Committee set policy by majority vote, BofA said, with up to 12 voting members and typically needing seven votes to pass a decision. This year’s voting regional Fed presidents – Hammack of Cleveland, Logan of Dallas, Kashkari of Minneapolis and Paulson of Philadelphia – leaned hawkish, the bank said. The Fed left interest rates unchanged at 3.75% during its June meeting. But a majority of FOMC members leaned hawkish during the meeting, seeing at least one interest rate hike before the year ends. The meeting was the first under New Fed Chair Kevin Warsh, who outlined a major overhaul in the central bank’s communications and economic projections. BofA said it relied on several frameworks to gauge the Fed’s policy stance, including Taylor Rule-style policy rules, financial conditions indexes, output and unemployment gaps, and estimates of the natural rate of interest, or r-star. The bank’s current risk assessment pointed to upside risks for both inflation and unemployment. For tracking market expectations, BofA said it preferred FOMC overnight index swaps over fed funds futures and SOFR futures, calling OIS the cleanest read of rate expectations, though all three should produce broadly similar signals. The Fed’s balance sheet stood at $6.7 trillion, or roughly 21% of nominal GDP, BofA said. Assets consisted mainly of Treasu