Former Fed Chair Jerome Powell Gave Wall Street a 20-Word Reality Check on Inflation in His Final FOMC Meeting
View original at nasdaq.comFormer Fed Chair Jerome Powell Gave Wall Street a 20-Word Reality Check on Inflation in His Final FOMC Meeting Key Points Jerome Powell's term as Fed chair ended on May 15, paving the way for President Trump's nominee, Kevin Warsh, to succeed him…
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In February 2026, before the impacts of the Iran war appeared in economic data, trailing 12-month inflation was 2.4%. In April 2026 it clocked in at 3.8%, driven primarily by higher energy prices.
60% confidenceThe FOMC may be left with little choice but to shift to a neutral or hiking bias in the not-too-distant future given uncertainties around the Iran war timeline and when the Strait of Hormuz might fully reopen.
60% confidenceThe Cleveland Fed's Inflation Nowcasting tool projects a 38-basis-point increase in TTM inflation from April to 4.18% in May 2026. The tool has slightly underestimated reported inflation in each of the previous two months.
60% confidenceGas prices have soared at the fastest pace in over 30 years following the Strait of Hormuz closure; diesel prices are up by a steeper percentage. Adverse effects of energy price shocks lag for businesses by a couple of months.
60% confidenceThe inflationary impact of the Iran war is expected to be a short-term issue.
60% confidenceApril PPI Inflation surged to 6%, well above expectations of 4.9% and the highest level since January 2023. Core PPI rose to 5.2%, above expectations of 4.3%. Both CPI and PPI are at 3+ year highs. Odds of rate hikes are rising.
60% confidenceAverage U.S. gas prices on May 6 per AAA: Regular $4.54 (up $1.56 since the Iran war began Feb 28), Premium $5.39 (up $1.85), Diesel $5.67 (up $1.81).
60% confidenceEnergy price inflation has not peaked yet; the question of whether to look past energy price shocks is not in front of the FOMC right now.
60% confidenceThe possible combination of rate hikes with a historically expensive stock market is not ideal. Without lower lending rates as a buffer, the Dow Jones, S&P 500, and Nasdaq Composite are vulnerable to significant volatility and downside.
60% confidence