Powell Says Higher Inflation Outlook Keeping Fed on Hold for Now

Economic

Central Bank

Summary:

Jerome Powell told Congress the Fed is holding rates steady due to inflation risks from tariffs, despite weaker data. While rate cuts remain possible later in 2025, the Fed prefers to wait for clearer signals.

Federal Reserve Chair Jerome Powell told lawmakers the central bank is in no rush to lower interest rates as officials wait for more clarity on the economic impact of President Donald Trump’s tariffs.

“The effects of tariffs will depend, among other things, on their ultimate level,” Powell said Tuesday in remarks before a congressional panel. “For the time being, we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance.”

Powell’s remarks before the House Financial Services Committee come on the heels of the Fed’s decision last week to leave interest rates unchanged in a range of 4.25%-4.5%.

“If it turns out that inflation pressures do remain contained, then we will get to a place where we cut rates, sooner rather than later,” Powell said in response to a question about the possibility of a July rate cut. “But I wouldn’t want to point to a particular meeting. I don’t think we need to be in any rush because the economy is still strong.”

Fed officials signaled last week they favor two rate cuts by year’s end. Economists surveyed by Bloomberg expect a cut to come by September.

Powell, however, underscored that uncertainty in the economic outlook meant a wide set of outcomes remained possible. Should inflation come in weaker than expected or the labor market deteriorate, he said, the Fed could cut rates sooner. Equally, he added, higher-than-expected inflation could push the Fed to keep holding.

“Many paths are possible here,” Powell said.

He acknowledged that recent data supported a case for lower rates. But, he emphasized, that data was backward-looking, and many economists expect “a meaningful increase in inflation” over the course of this year due to tariffs.

“At this time, all forecasters are expecting pretty soon that some significant inflation will show up from tariffs,” he said. “We can’t just ignore that.”

Treasury yields and the dollar declined during Powell’s testimony as traders priced in slightly higher odds of at least two Fed interest-rate cuts by the end of the year. They pointed to his comments on the potential for tariffs to contribute less to inflation than forecasters currently expect. Powell’s appearance coincided with the release of a weaker-than-anticipated consumer confidence gauge for June that also supported those wagers.

Trump Comments

The central bank’s on-hold position has angered Trump, who has consistently called for lower rates and argued the Fed is keeping borrowing costs for the US government high by holding rates steady.

“‘Too Late’ Jerome Powell, of the Fed, will be in Congress today in order to explain, among other things, why he is refusing to lower the Rate,” Trump said on social media early Tuesday. “I hope Congress really works this very dumb, hardheaded person, over. We will be paying for his incompetence for many years to come.”

Powell and several other policymakers have pointed to increased economic uncertainty stemming from the Trump administration’s stepped up use of tariffs, and other policy changes, to justify leaving rates steady for now. Many forecasters expect the tariffs to put upward pressure on inflation and dent economic growth, although those estimates carry significant uncertainty.

Trump has frequently shifted on the specifics of his tariff policies, and the administration says it’s working on trade deals that could affect the nature and level of the duties.

“Expectations of that level, and thus of the related economic effects, reached a peak in April and have since declined,” Powell said in his opening statement, which largely echoed remarks he delivered last week. “Even so, increases in tariffs this year are likely to push up prices and weigh on economic activity.”

Powell said the tariffs’ impact on inflation could be short-lived or possibly be more persistent.

Tariff Effect

Avoiding the latter outcome “will depend on the size of the tariff effects, on how long it takes for them to pass through fully into prices and, ultimately, on keeping longer-term inflation expectations well anchored,” he said.

Economic data so far has shown limited impact from tariffs. Fed Governors Christopher Waller and Michelle Bowman have pointed to that dynamic, among other factors, in arguing the Fed could cut as soon as its next meeting in July.

Meanwhile, Powell described the overall economy and labor market as solid. He said inflation had eased significantly from highs reached in mid-2022, but was somewhat elevated above the Fed’s 2% objective. He added that beyond the next year or so, most measures of longer-term expectations remain consistent with the Fed’s inflation goal.

Source: Bloomberg

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Adam

Stocks

Dow Rallies 500 Points Mid-Session as Oil Collapses on Ceasefire Hopes

Stocks surged Tuesday midday, with the Dow up more than 500 points, as investors welcomed a steep drop in oil prices and a tentative ceasefire between Israel and Iran. The S&P 500 advanced around 1%, while the Nasdaq outperformed, gaining about 1.4%. A broad risk-on move was underway, supported by easing geopolitical tensions and investor confidence in economic fundamentals.

How Are Oil Prices and Airlines Responding to Ceasefire Developments?

Daily Light Crude Oil Futures

U.S. crude dropped over 6% midday, extending Monday’s 7% slide and marking a two-day decline of roughly 13%. Brent crude followed suit, hitting fresh session lows.

Nasdaq 100 and S&P500: Midday Rally Builds as Oil Plunges and Rate Bets Shift_2

Daily United Airlines Holdings Inc

The pullback in energy prices fueled gains across transportation stocks. United Airlines, Frontier, and Delta all rose more than 2%, as traders priced in a drop in jet fuel costs.

The sharp selloff in oil followed signs of de-escalation in the Middle East. President Donald Trump claimed that “ISRAEL is not going to attack Iran” and insisted the ceasefire remained in place, despite mutual accusations of violations. Israel alleged attacks on radar installations near Tehran, while Iran denied retaliatory missile launches.

Which Stocks and Sectors Are Leading the Charge?

Daily Broadcom Inc

Risk appetite extended beyond transport. Broadcom gained 3%, continuing its recent momentum in AI infrastructure, while Nvidia rose 2%, supported by sustained strength in semiconductor demand. The gains came as investors brushed off immediate geopolitical risks and rotated into higher-beta names.

UBS Global Wealth Management’s Solita Marcelli noted that geopolitical shocks tend to have limited market impact, and pointed to strong fundamentals underpinning the equity rally. Tuesday’s advance built on Monday’s solid gains, which came after Qatar said it had intercepted Iranian missiles targeting a U.S. military base.

What Is the Federal Reserve Signaling on Rates?

Traders also weighed comments from Fed Chair Jerome Powell, who testified before the House Financial Services Committee. Powell emphasized patience, stating the Fed would wait to assess the economic fallout from new tariffs before adjusting rates. Meanwhile, some Fed officials floated the possibility of easing policy as soon as July, suggesting growing internal debate.

What’s the Outlook Heading Into the Close?

With oil off sharply and tech leading gains, sentiment remains bullish so long as geopolitical tensions don’t reignite. Traders are now focused on upcoming inflation data and Fed commentary for clues on policy direction.

If energy prices stay low and the ceasefire holds, the market could maintain its upward momentum—though volatility may resurface with any policy or geopolitical misstep.

Source: fxempire

Risk Warnings and Disclaimers

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Owen Li

Economic

U.S. consumer confidence unexpectedly deteriorated in June as households increasingly worried about job availability, another indication that labor market conditions were softening against the backdrop of rising economic uncertainty because of the Trump administration's tariffs.

The ebb in confidence reported by the Conference Board on Tuesday was across all age cohorts and nearly all income groups. It was also across the political spectrum, with the largest decline among Republicans.

Consumers remained pre-occupied with the import duties and were mostly undecided on big-ticket purchases. There was a decline in the share expecting their incomes to increase, though perceptions of the current financial situation remained solid.

The share of consumers viewing jobs as plentiful was the smallest since March 2021, aligning with the continued elevation in the number of people collecting unemployment checks as well as a moderation in job growth.

"Worry over prices in tandem with a diminished share of consumers who expect their household incomes to increase over the next six months points to still-elevated household financial anxieties," said Tim Quinlan, a senior economist at Wells Fargo.

"Our forecast still calls for a stall in spending in the second half of this year. We have been making the case that what looks like resilience in retail spending in recent months may in fact be an indication of pulled-forward demand ahead of the full price impact of tariffs and that those outlays are apt to be curtailed in coming months."

The Conference Board's consumer confidence index dropped 5.4 points to 93.0 this month, erasing nearly half of the sharp gain in May. Economists polled by Reuters had forecast the index increasing to 100.0.

The cutoff date for the survey was June 18, before the U.S. joined in the fray between Israel and Iran, by bombing Tehran's nuclear facilities. Trump on Monday announced a ceasefire. The survey noted that "references to geopolitics and social unrest increased slightly from previous months but remained much lower on the list of topics affecting consumers' views."

The share of consumers who viewed jobs as being "plentiful" dropped to 29.2%, the lowest since March 2021, from 31.1% in May. Some 18.1% of consumers said jobs were "hard to get," down from 18.4% last month.

The survey's so-called labor market differential, derived from data on respondents' views on whether jobs are plentiful or hard to get, narrowed to a four-year low of 11.1 from 12.7 last month. This measure correlates to the unemployment rate in the Labor Department's monthly employment report.

Economists said that, combined with high numbers of people on unemployment benefits, raised the risk that the jobless rate could rise to 4.3% in June from 4.2% in May.

"Given the concurrent rise in continuing jobless claims, it looks increasingly likely that the unemployment rate will rise to 4.3% in next week's employment report," said Abiel Reinhart, an economist at JPMorgan.

This is a line chart that shows a consumer confidence index over the past 20 years. In the month of June, the overall index was 93.0, the view of the current economy was 129.1 and expectations for the future were 69.0.

INFLATION EXPECTATIONS EASE

Though consumers' one-year inflation expectations decreased to 6.0% from 6.4% in May, the share expecting interest rates to rise was the highest since October 2023.

Federal Reserve Chair Jerome Powell told lawmakers on Tuesday the U.S. central bank needed more time to gauge if tariffs pushed up inflation before considering lowering rates. The Fed last week left its benchmark overnight interest rate in the 4.25%-4.50% range where it has been since December.

Stocks on Wall Street traded higher. The dollar fell against a basket of currencies. U.S. Treasury yields were lower.

While consumers were unsure about big-ticket purchases over the next six months, they were less inclined to spend more on services, though spending intentions for dining out, motor vehicle services, visits to museums and historic sites as well as fitness activities rose.

Vacation plans were unchanged, though more consumers planned to travel abroad. Plans to travel within the United States fell. Fewer consumers intended to buy a home, likely because of higher mortgage rates, which have combined with still-high house prices to reduce affordability.

But house price inflation is slowing as weak demand boosts the supply of unsold homes on the market.

A separate report from the Federal Housing Finance Agency showed single-family house prices fell 0.4% in April, the first decline since August 2022, after being unchanged in March.

That lowered the annual increase to 3.0% in April, the smallest rise since May 2023, from 3.9% in March. Economists do not expect an outright decline in house prices at a national level, though some individual markets could see sharp decreases.

A line chart titled "Annual change in U.S. home prices" that tracks the metric over time

"While the supply of homes for sale has increased, the housing market continues to suffer from a shortage of supply," said Bernard Yaros, lead U.S. economist at Oxford Economics.

"However, some regions, mainly those that saw the biggest run-up in prices around the pandemic, may be at risk of a period of negative price growth, something already occurring in parts of Florida."

Source: Reuters

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Adam

Commodity

Oil prices fell sharply Tuesday after President Donald Trump said China can keep buying oil from Iran, a sign that the U.S. is easing its maximum pressure campaign on the Islamic Republic in the wake of a ceasefire with Israel.

Global benchmark Brent fell $4.06, or 5.68%, to $67.42 per barrel by 12:23 p.m. ET. U.S. crude oil was last down $3.88, or 5.66%, to $64.63 a barrel. Prices closed 7% lower on Monday as the oil market bet that the conflict in the Middle East was winding down.

“China can now continue to purchase Oil from Iran,” Trump said in a post on his social media platform Truth Social. “Hopefully, they will be purchasing plenty from the U.S., also. It was my Great Honor to make this happen!”

Trump threatened in May to bar any country buying Iranian oil from doing business with the U.S. China purchases the vast majority of the 1.7 million barrels per day that Iran typically exports, according to data from Kpler.

“Trump has always seemed loath to remove Iranian supply from the market, given the upward pressure on oil prices it would have,” said Matt Smith, lead oil analyst at Kpler. “Now he has no beef with Iran given its diminished nuclear capabilities — his focus is shifting to getting oil prices back down.”

Oil prices have tumbled to levels last seen before Israel started bombing Iran on June 13, as investors now believe the risk is low that a major supply disruption will occur in the Middle East.

The U.S. decision to join Israel’s campaign and bomb three key nuclear sites in Iran over the weekend initially triggered fears that Tehran might try to choke off oil exports from the Persian Gulf in retaliation.

Instead, Tehran launched a missile attack on a U.S. airbase in Qatar that left no casualties, providing an off-ramp from further escalation. Trump announced a ceasefire agreement between Israel and Iran shortly afterward.

The ceasefire teetered on the brink of collapse early Tuesday as Trump accused both Iran and Israel of violating the agreement shortly after it went into effect. The president demanded that Jerusalem and Tehran adhere to the ceasefire, reserving unusually harsh words for Israel.

“I’m not happy with Israel,” Trump told reporters en route to a NATO summit in the Netherlands. “I’m not happy with Iran either but I’m really unhappy if Israel” continues its bombing campaign Tuesday.

Throughout the conflict, traders feared that Israel might target the 3.3 million bpd of crude oil that Iran produces, or that the Islamic Republic might lash out by targeting energy infrastructure in the Gulf nations, including Iraq.

Investors also watched if Iran would try to close the Strait of Hormuz linking the Persian Gulf and the Gulf of Oman. The strait, used to transport 20% of the world’s crude, is a key route for Iranian and other Middle Eastern shipments, including Saudi Arabia, the world’s largest oil exporter, the United Arab Emirates, Iraq, Kuwait and Bahrain.

source : Cnbc

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Devin

Central Bank

New York Fed President John Williams said Tuesday that maintaining a modestly restrictive monetary policy stance is "entirely appropriate" given current economic conditions.

Speaking at the NY CREATES Albany NanoTech Complex in Albany, New York, Williams emphasized that keeping the federal funds rate at its current level of 4.25% to 4.5% allows time for policymakers to analyze incoming data and evaluate risks.

Williams’ position contrasts with some other Fed governors who have suggested a potential rate cut in July might be appropriate. However, his comments align with Fed Chairman Jerome Powell, who on Tuesday signaled patience on rate cuts amid economic stability.

"Given the continued uncertainty, the solid labor market, and inflation still above our 2 percent goal, the FOMC decided at its meeting last week to leave the target range for the federal funds rate unchanged," Williams said in his speech.

He noted that the Fed continues to reduce its holdings of Treasury securities and agency debt and mortgage-backed securities, adding that "despite market volatility related to trade policy and other developments, that process continues to go very smoothly."

Williams pointed to mixed economic signals, with survey data showing pessimism and uncertainty about the economic outlook, while hard economic data indicates the U.S. economy "remains in a good place."

In his outlook, Williams expects real GDP growth to slow to just over 1% this year, with unemployment rising to around 4.5% by year-end. He projects inflation will increase to around 3% in 2025 due to tariffs, before gradually declining to 2% over the following two years.

The New York Fed president also highlighted findings from a recent survey showing that about three-quarters of manufacturers and service firms in New York and New Jersey have passed along at least some tariff-related cost increases to customers.

Source: Investing

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Warren Takunda

Economic

This marks a dramatic de-escalation in a conflict that threatened to rapidly expand following U.S. strikes on Iranian nuclear facilities, which risked Iran shutting the critical Gulf of Hormuz in retaliation.

However, a truce deadline of 5am BST is in force today, and this is boosting investor morale.

Oil prices have fallen and the Dollar is lower as a result: the Pound to Dollar exchange rate (GBP/USD) is quoted at 1.3564, having been as low as 1.3371 yesterday.

With stocks trading higher in Asia, and Europe and the U.S. set to follow, implied volatility has dropped, and this is helping the Pound against the Euro: The Pound to Euro exchange rate (GBP/EUR) has risen from 1.1642 to 1.1687.

Currencies that are highly sensitive to broader sentiment, like the Australian and New Zealand Dollars, are leading the gains.

Iran yesterday attacked a U.S. base in Qatar in response to the weekend attack by the U.S. on Iran's nuclear facilities.

The base had previously been evacuated, leading investors to see this as a low-risk and symbolic retaliation that would allow Iran to back down.

"Iran had previously threatened to block the Strait of Hormuz, which is one of the world's most important transport routes for oil and natural gas, and the fact that Iran did not attack energy-related targets caused oil prices to fall and stock markets to rise," says Elisabet Kopelman, U.S. Economist at SEB.

"So far, a ceasefire – or at least the averted risk of extended conflict – seems to be the main assumption in the markets," she adds.

A de-escalation in the conflict should allow GBP/EUR to extend a recovery; however, upside will likely be limited owing to the UK's slowing economy and the heightened odds that the Bank of England will accelerate the interest rate cutting cycle.

The GBP/USD, on the other hand, has a greater propensity to rise, given it is largely driven by the U.S. side of the equation, where a multi-month devaluation is underway.

The GBP/AUD, GBP/NZD and GBP/CAD all have scope to decline as Pound Sterling gives way to those currencies that lost ground when tensions were rising.

Source: Poundsterlinglive

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Adam

Cryptocurrency

President Donald Trump took office in January pledging to “make America the crypto capital of the world." He has since harnessed wide swaths of the federal government to bolster the industry — all while raking in huge sums of money for his family's business.

By some estimates, crypto ventures now account for nearly 40% of the Trump Organization's $2.9 billion net worth. But the Republican president's championing of the industry has been just as big a boon for many of the industry's top names.

Many have seen their profits and political standing soar, while investigations of potential wrongdoing and other legal entanglements led by the administration of Trump's predecessor, Democratic President Joe Biden, have largely fallen away.

Here's a look at some of the crypto industry's top leaders and their ties to Trump:

Justin Sun

A Chinese-born crypto entrepreneur and founder of the cryptocurrency platform Tron, Sun is best known for buying a piece of conceptual art consisting of a banana duct-taped to a wall for $6.2 million and subsequently eating the banana.

Ties to Trump: Sun was the top investor in Trump’s meme coin, $Trump, and secured the top spot at the president's recent crypto dinner, which was held at Trump’s golf course just outside Washington. Sun posted a professionally produced video of himself receiving a $100,000 gold watch that Trump’s meme coin awarded to the top four investors. Sun also recently bragged about his close ties to the White House, posting in Chinese on X “It’s all true” over a series of posts listing his links to the president and his meme coin. Sun was sued by the Securities and Exchange Commission under Biden for working to artificially inflate the price of crypto, an investigation that has been paused since Trump took office. Sun was an early and important investor in World Liberty Financial, a crypto venture Trump and his sons Eric and Donald Jr. launched in September. The president’s most recent financial disclosure report reveals he made more than $57 million last year from World Liberty Financial, which has launched USD1, a stablecoin pegged at a 1-to-1 ratio to the U.S. dollar.

Michael Saylor

The co-founder and chair of Strategy, formerly known as MicroStrategy, Saylor is one of bitcoin’s most prominent and outspoken evangelists. He owns a yacht once featured on “Entourage,” and his is the most high-profile bitcoin treasury company, which is a type of firm primarily focused on buying and holding bitcoin as its business model. Strategy currently holds more than 2% of all outstanding bitcoins in circulation and is constantly buying more.

Ties to Trump: Trump Media, the parent company of the president’s social media platform, Truth Social, has announced it will raise $2.5 billion from institutional investors to buy bitcoin in an attempt to build up a cryptocurrency reserve, similar to what Saylor’s company is best known for. Saylor met in January with Eric Trump at the president's Mar-a-Lago resort in Palm Beach, Florida, and the president's son has spoken publicly about how he and Saylor were friends who knew each other in New York two decades ago. Saylor also attended the president's first crypto summit at the White House in March. “All of us owe him a tremendous debt of gratitude,” Eric Trump said of Saylor, praising him at the recent annual bitcoin conference in Las Vegas as an effective spokesperson for the crypto community.

Changpeng Zhao

Known universally as CZ, Zhao is founder and former CEO of Binance, the world’s largest cryptocurrency exchange. He was sentenced last year to four months in prison for failing to stop criminals from using the platform to move money connected to child sex abuse, drug trafficking and terrorism. Zhao was released in September.

Ties to Trump: World Liberty Financial recently announced that an investment fund in the United Arab Emirates would be using $2 billion worth of USD1 to purchase a stake in Binance. Zhao also has publicly said that he's asked Trump for a pardon that could nullify his conviction.

Brian Armstrong

Co-founder and CEO of Coinbase, a major cryptocurrency exchange, Armstrong has been a key figure in the crypto industry’s push into politics.

Ties to Trump: Armstrong and Coinbase were major donors to a political action committee that helped Trump and other pro-crypto candidates. He met with Trump weeks after Election Day and attended the White House crypto summit. Coinbase hired Trump’s former campaign manager, Chris LaCivita, to its Global Advisory Council. Trump also addressed, via prerecorded video message, Coinbase's State of Crypto Summit this month.

The Winklevoss Twins

Tyler and Cameron Winklevoss founded the Gemini cryptocurrency exchange and are most famous to the general public for suing Mark Zuckerberg over the creation of Facebook, an important plot point in the movie “The Social Network.” In 2023, Biden's SEC sued Gemini for selling unregistered securities, another case that's been paused since Trump took office.

Ties to Trump: The twins each pledged $1 million donations to the Trump campaign, as well as lavish donations to Elon Musk’s political group – though some of the donations to Trump’s campaign were returned because the Winklevoss brothers had violated federal limits. They were invited to Trump’s crypto summit and praised the president’s approach to the sector then. Addressing the crypto conference in Las Vegas, Vice President JD Vance said the brothers “really helped break the dam” and persuade tech sector leaders to support Trump’s campaign. “I think they were some of the first big names in Silicon Valley to take that step, and a whole host of people followed them,” Vance said.

David Bailey

Bailey is the CEO of BTC Inc., an influential holding company with ventures throughout the crypto industry including Bitcoin Magazine. He recently raised $300 million to launch Nakamoto, a publicly traded bitcoin investment company.

Ties to Trump: Baily served as a crypto adviser to Trump's campaign. Vance also saluted Bailey at the Las Vegas conference, saying he was “grateful for everything you've done for the bitcoin community.”