Fed Officials Signal Rate Cut Pause as Oil Volatility Clouds Path
San Francisco Fed President Mary Daly and Governor Chris Waller both signaled the Fed is in no rush to cut rates further, with Waller explicitly flagging a potential halt to cuts due to lingering inflation concerns. Daly noted that geopolitical tensions tied to Iran are adding oil price volatility that complicates the policy outlook. Long-term inflation expectations remain anchored, but the near-term picture is murky enough to keep the Fed on hold.
A Fed that stops cutting rates — or pauses longer than markets expected — is a headwind for rate-sensitive assets like tech stocks, REITs, and long-duration bonds. Equity valuations built on the assumption of multiple 2025 cuts get harder to justify if the Fed stays put. The oil wildcard is particularly important: if energy prices spike due to Middle East tension, it could reignite inflation and push rate cuts even further out.
May 6-7: Next FOMC rate decision and press conference. May 13: April CPI inflation report. May 15: April PPI inflation data. Date TBD: Kevin Warsh Senate confirmation hearing for Fed Chair nominee.
- Fed's Daly Says Economy Solid, Consumers Still Spending · Bloomberg
- Warsh Hearing Will Test How Far He’ll Push Balance Sheet Reform · Bloomberg
- Daly Says Fed Policy Is in a 'Very Good Place' Right Now · Bloomberg
- Fed’s Waller turns cautious on rate cuts and warns of a ’lasting increase in inflation’ · MarketWatch
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