Chicago Fed President Austan Goolsbee called the latest inflation data "bad news," pushing back against expectations for rate cuts. Headline PCE inflation hit 3.5% year-over-year, the highest since May 2023.
The spike is fueled by rising geopolitical tensions. The ongoing US-Iran conflict closed the Strait of Hormuz, a critical chokepoint for oil, pushing Brent crude past $100 a barrel.
Markets now price only a 4.5% chance of a cut by June 2026, and 28% by September. The Fed holds steady, with no cuts expected this year. Analysts say persistent inflation and energy risks are deterring any dovish shift.