Fed Braces for Rate Hike as Oil Surge Fuels Inflation Fire
The Federal Reserve is cornered—again. With oil prices screaming north and inflation refusing to die, Powell & Co. have no choice but to tighten the screws.
Markets brace for impact
Another rate hike looms as energy costs bleed into everything from groceries to freight. The Fed’s 'transitory' inflation narrative? Buried under OPEC’s latest power play.
Wall Street’s lose-lose game
Traders now face a Fed that’s either late (again) or overly aggressive—pick your poison. Meanwhile, Main Street wallets get thinner by the pump. Classic 'wealth preservation' at work.
One thing’s certain: the money printer’s hangover just got more expensive. Cheers to 'soft landings.'
Iran warns of retaliation as US and Israel bomb nuclear sites
Ten days ago, Israel carried out unprovoked airstrikes on Iranian territory. Tehran hit back. Then, over the weekend, the US joined the fight and dropped bombs on three nuclear facilities in Iran. In response, Iran’s foreign minister said the country “reserves all options to defend its sovereignty.”
But since 2000, Iran has threatened over ten times to close off the Strait of Hormuz. If they actually go through with it this time, energy prices will definitely explode.
The Strait is only 21 miles wide but carries one-fifth of the world’s oil every day. It also sees more traffic than both the Panama and Suez Canals. About 35% of all seaborne LNG also passes through it. The US Navy has kept forces in the area for decades because of how strategic it is.
Hormuz is the only way out of the Persian Gulf by sea. If Iran closes it, the world loses access to a massive portion of oil supply overnight. That WOULD almost guarantee a military response from Washington, Tel Aviv, or most likely both.
US Secretary of State Marco Rubio told Fox News on Sunday that China should intervene and talk Iran down. “I encourage the Chinese government in Beijing to call them about that, because they heavily depend on the Straits of Hormuz for their oil.” China is Iran’s biggest oil customer and maintains friendly diplomatic ties with Tehran, publicly condemning Israel’s actions.
Trump demands rate cuts while Powell stays silent
While global tension rises, President Donald TRUMP continues to push for interest rate cuts. Even before his reelection in 2024, Trump had been attacking Jerome Powell and demanding cheaper borrowing costs.
Since returning to the WHITE House, he’s kept up the heat. Trump has criticized the Fed Chair publicly nearly every week, insulting Powell both at press conferences and online. Powell, for his part, hasn’t said anything. He avoids reacting, never comments on the insults, and refuses to take the bait.
But rate cuts right now are not realistic. With oil possibly hitting $130 and inflation climbing back toward 5%, cutting rates could add fuel to the fire. Instead, the Federal Reserve will likely raise them again, just like they did in 2023. The LINK between oil and inflation is well known. The Fed’s own modeling from the research we mentioned earlier shows how damaging oil shocks are, especially when financial markets can’t absorb the risk. The worse the shock, the harder it is to fight the resulting high inflation.
With Trump pushing for cuts and Powell boxed in by rising costs, the Federal Reserve is once again facing political and economic pressure at the same time.
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