The Federal Reserve is widely expected to keep interest rates on hold<\/strong> as policymakers wait to see the additional collateral damage on the U.S. economy from the Iran war.<\/p>\n The May Consumer Price Index<\/strong> accelerated to the fastest pace since early 2023, climbing 0.5% from April and 4.2% from a year earlier, the Bureau of Labor Statistics reported.\u00a0<\/p>\n And in a separate release, the BLS saidreal average hourly earnings <\/strong>fell 0.7% in May from a year earlier, the biggest drop in more than three years.<\/p>\n Why? The Iran war\u2019s energy-price spike outstripped pay gains.<\/p>\n Even if the war ends soon, economists expect additional price increases in the near future, which could, as I\u2019ve reported, prompt Fed officials to hike the benchmark Federal Funds Rate later this year.\u00a0<\/strong><\/p>\n This isn\u2019t the economic landscape Kevin Warsh<\/strong>expected to face at his first Federal Open Market Committee meeting June 16-17 <\/strong>as Fed Chair.\u00a0<\/p>\n The U.S. central bank was widely expected to make up to two quarter-point rate cuts in 2026 at the beginning of this year.\u00a0<\/p>\n Not now.\u00a0\u00a0<\/p>\n Jeffrey Roach, chief economist for LPL Financial, told TheStreet in an email that if the Strait of Hormuz remains disrupted through Labor Day weekend, \u201cwe would expect the energy shock to affect additional sectors and heighten uncertainty about the future path<\/strong>\u201d of monetary policy.<\/p>\n \u201cRate expectations could be further upended if this crisis lasts throughout the summer,\u2019\u2019 Roach said. \u201cFor next week, expect the Fed to remain on hold while removing any bias toward additional easing.\u201d\u00a0<\/strong><\/p>\n FRED Economic Data/TheStreet<\/p>\n<\/figcaption><\/figure>\n The Fed\u2019s dual mandate<\/strong> from Congress requires maximum employment and stable prices.<\/p>\n The unexpectedly strong May jobs report delivered an upside surprise for payroll growth and the unemployment rate held steady at 4.3%.<\/p>\n The FOMC continued to hold the funds rate, which impacts the cost of short-term borrowing, steady at 3.50% to 3.75% <\/strong>during its April 30 meeting.<\/p>\n This came after policymakers cut rates by a quarter point at each of its last three meetings of 2025 to shore up the softening labor market.<\/p>\n Related: Inflation drives rate-cut debate at Warsh’s first Fed meeting<\/strong><\/p>\n In the weeks since the April FOMC meeting, multiple Fed officials have expressed concern about the upside risk to the inflation<\/strong> side of the mandate and pivoted to a more hawkish outlook, which could result in a more restrictive policy<\/strong> in the coming months.<\/p>\n The CME Group FedWatch Tool predicts a near 100% chance the FOMC holds rates steady this month. Futures traders have begun penciling in a quarter-point cut in December.<\/p>\n As I\u2019ve reported, President Donald Trump and other White House officials have repeatedly called for the Fed to slash rates dramatically to 1% or lower, mainly to reduce the amount of interest on the nation\u2019s $38.91 trillion debt.<\/p>\n \u201cThe numbers were great,\u201d the president said about the CPI data during a June 10 bill signing at the White House, adding that he expected the economic fallout from the Iran War to have been worse.\u00a0<\/p>\n The president told NBC News in a June 5 interview that while he wants Warsh \u201cto do whatever he wants\u201d to monetary policy, he also warned that \u201cthere\u2019s no reason to raise interest rates.<\/strong>\u201d<\/p>\n Phil Camporeale, chief investment strategist at J.P. Morgan Wealth Management, said in an email to TheStreet that the muted reaction in Treasury rates <\/strong>after the CPI report \u2014 which came in as expected \u2014 \u201cvalidates that this is a supply-driven inflation shock versus an overheating demand-driven economy.\u201d<\/p>\n \u201cWe believe this is more indicative of a Fed on hold versus tightening<\/strong>,\u2019\u2019 Camporeale said. \u201cOur expectation is that energy prices will peak in Q2, limiting the impact on core prices in the second half of the year.\u2019\u2019<\/p>\n But the combination of higher prices and weaker pay gains is putting more stress on household budgets at a time when consumer sentiment<\/strong> is already at record lows, according to Bloomberg.<\/p>\n \u201cThe longer the Middle East conflict persists, the broader and more persistent inflationary pressures are likely to become,\u201d EY-Parthenon Chief Economist Gregory Daco said in a note to Bloomberg.<\/p>\n \u201cHigher fertilizer prices <\/strong>will place upward pressure on food inflation, while rising transportation and production costs gradually pass through to a wider range of goods and services<\/strong>,\u2019\u2019 Daco wrote.<\/p>\n Related: White House sends blunt message to Warsh as Fed rate fears rise<\/strong><\/p>\n #Hot #CPI #sticks #pin #Fed #ratecut #bets<\/p>\n","protected":false},"excerpt":{"rendered":" Welcome to our Hot Inflation Summer. Beer, beef, and bikini prices are rising just as our paychecks are shrinking, according to two government reports released June 10.\u00a0 Plus the cost… <\/p>\n","protected":false},"author":1,"featured_media":6471,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[246],"tags":[4076,2918,674,1048,7540,5710,1841],"class_list":["post-6705","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-popular","tag-bets","tag-cpi","tag-fed","tag-hot","tag-pin","tag-ratecut","tag-sticks"],"_links":{"self":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts\/6705","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=6705"}],"version-history":[{"count":0,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts\/6705\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/media\/6471"}],"wp:attachment":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6705"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6705"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6705"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Fed expected to hold rates steady at June meeting<\/strong><\/h2>\n
![](\"https:\/\/www.thestreet.com\/.image\/NDA6MDAwMDAwMDAzMDcwNjYw\/thestreet_graph_federal-reserve-effective-federal-funds-rate.jpg?profile=rss\")
Fed\u2019s dual mandate for inflation, jobs requires a tricky balance<\/strong><\/h2>\n
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Labor market shifts influence Fed rate-cut bets<\/strong><\/h2>\n
White House pushes Fed rate-cut messages<\/strong><\/h2>\n
CPI backlash impacts Fed rate-cut bets<\/strong><\/h2>\n