President Trump’s campaign for lower interest rates in the U.S. faces another setback this week at the meeting of the Federal Open Market Committee (FOMC). Wall Street analysts have generally come to the conclusion that the FOMC will hold rates steady, if not hike them—and Trump’s own foreign policy is an underlying factor. The FOMC, led by central bank chairman Kevin Warsh, will meet Tuesday and Wednesday of this week to discuss progress towards its targets of maximum employment and inflation at 2%.It is the latter task that has caused the Fed some difficulty over the past few years. At the time of writing, inflation stands at 3.5%—a drop from May to June, but still elevated compared to the start of the year and the Fed’s target.
Part of that reading has come from higher fuel prices, up 15.7% from a year ago. While pressure in this category is beginning to fade (down 4.9% May to June), prices remain elevated as a result of conflict in the Middle East, choking global oil supply as a result.
There is little sign of a resolution between Washington and Tehran in sight. While the two sides are not currently engaged in active military conflict, as they have been over the past fortnight, no official ceasefire has been announced. While the fragile pause of fire allows space for diplomacy to proceed, neither side has indicated they will capitulate over control of the Strait of Hormuz—the key shipping lane in the movement of oil around the planet.
