"September, or more likely October, is now the realistic opportunity for a rate cut, and even that is far from guaranteed. The data coming through is not consistent with easing in July. In fact, it points in the opposite direction. Inflation is not falling fast enough. The latest wholesale inflation data shows prices rising at 3.4% year-on-year, the strongest pace in a year, and core measures are still running close to 4%."
"Energy is now the dominant macro driver again. A near 50% jump in oil prices in a matter of weeks will not stay contained. It feeds directly into transport, production, and consumer prices. The Fed knows there's a lag, and that lag is exactly why they will not cut prematurely."
"Markets are still behaving as though inflation is under control. It isn't. Core inflation is running around 3.1%, and policymakers are now openly considering the risk that it stays closer to 3% even into next year."
The Federal Reserve maintains interest rates at 3.5% to 3.75% while facing mounting inflation risks from geopolitical conflicts, elevated energy prices, and sustained economic strength. Wholesale inflation rose 3.4% year-on-year, the fastest pace in a year, with core measures near 4%. Oil prices surged toward $95-$100 per barrel following Iran conflict escalation, driving US gasoline prices to 2023 highs. Energy has become the dominant macroeconomic driver, with oil price increases directly impacting transport, production, and consumer costs. The labor market remains resilient with unemployment at 4.4% and ongoing wage pressures. Rate cuts are unlikely before September or October, as policymakers recognize inflation remains uncontrolled and core inflation may persist near 3% into next year.
#federal-reserve-interest-rates #inflation-pressures #energy-prices-and-geopolitics #monetary-policy #labor-market-conditions
Read at London Business News | Londonlovesbusiness.com
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