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.
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