Will there be rate cuts this year? The decision-making power is no longer with the Federal Reserve, but with Iran. The war is entering a critical stage.
The early morning FOMC meeting and Powell's remarks were widely interpreted by the market as hawkish. But objectively speaking, it's nothing more than the economy still doing okay and employment still having hidden worries; on inflation, concerns that the Iran war will cause expectations to lose their anchor; on interest rates, levels are slightly restrictive.
If we synthesize it all and translate it into more common language, it would be: due to the uncertainty of the Iran conflict, there are no conditions for rate hikes, because growth and employment conditions don't support it; there's also no confidence in rate cuts, because we don't know how long the war will last or whether it will cause inflation expectations to spiral out of control.
Therefore, the focus remains on the Iran war.
The recent escalation of the Iran situation is undoubtedly ongoing, but looking at it in detail, although the US-Israel alliance exists, their demands are not the same. Israel simply wants to overthrow the regime, but Trump is not opposed to engaging with a new government. As a result, as the de facto commanding authority, Iran's Larijani was assassinated, the intelligence chief was also assassinated, and the gas and oil fields (Iran's South Pars field) were also bombed.
Subsequently, Iran began threatening neighboring oil and gas fields. Iran's intention to drag this into a war of attrition is clear, and America's intention for quick resolution is also clear.
So the result is: the situation must escalate rapidly in the short term for the conflict to de-escalate early. But the problem is, Iran's Revolutionary Guards are not amateur forces like the Houthis. Therefore, restoring pre-war shipping levels is becoming increasingly unlikely.
To answer the question, regarding rate cuts this year, I still personally believe there's a chance to begin cutting rates in the second half of the year.
The main reason is: although the Federal Reserve is concerned about inflation, it may also be overestimating employment and growth levels. Especially the impact of high oil prices is not just about inflation—further squeezing of actual demand and corporate profits still exists. As long as time drags on, when employment and growth slowdown becomes apparent, inflation will no longer be an issue.
Will there be rate cuts this year? The decision-making power is no longer with the Federal Reserve, but with Iran. The war is entering a critical stage.
The early morning FOMC meeting and Powell's remarks were widely interpreted by the market as hawkish. But objectively speaking, it's nothing more than the economy still doing okay and employment still having hidden worries; on inflation, concerns that the Iran war will cause expectations to lose their anchor; on interest rates, levels are slightly restrictive.
If we synthesize it all and translate it into more common language, it would be: due to the uncertainty of the Iran conflict, there are no conditions for rate hikes, because growth and employment conditions don't support it; there's also no confidence in rate cuts, because we don't know how long the war will last or whether it will cause inflation expectations to spiral out of control.
Therefore, the focus remains on the Iran war.
The recent escalation of the Iran situation is undoubtedly ongoing, but looking at it in detail, although the US-Israel alliance exists, their demands are not the same. Israel simply wants to overthrow the regime, but Trump is not opposed to engaging with a new government. As a result, as the de facto commanding authority, Iran's Larijani was assassinated, the intelligence chief was also assassinated, and the gas and oil fields (Iran's South Pars field) were also bombed.
Subsequently, Iran began threatening neighboring oil and gas fields. Iran's intention to drag this into a war of attrition is clear, and America's intention for quick resolution is also clear.
So the result is: the situation must escalate rapidly in the short term for the conflict to de-escalate early. But the problem is, Iran's Revolutionary Guards are not amateur forces like the Houthis. Therefore, restoring pre-war shipping levels is becoming increasingly unlikely.
To answer the question, regarding rate cuts this year, I still personally believe there's a chance to begin cutting rates in the second half of the year.
The main reason is: although the Federal Reserve is concerned about inflation, it may also be overestimating employment and growth levels. Especially the impact of high oil prices is not just about inflation—further squeezing of actual demand and corporate profits still exists. As long as time drags on, when employment and growth slowdown becomes apparent, inflation will no longer be an issue.