Markets Still Price Nearly 25-Basis-Point Fed Hike as Oil Falls and April PCE Stays Modest
Updated
Updated · robinjbrooks.substack.com · May 31
Markets Still Price Nearly 25-Basis-Point Fed Hike as Oil Falls and April PCE Stays Modest
5 articles · Updated · robinjbrooks.substack.com · May 31
Rate markets still imply almost one 25-basis-point Fed hike by year-end, even after Brent crude retreated sharply from its early-April peak.
April PCE data showed modest underlying inflation, reinforcing an earlier CPI signal that price pressures are not broadening enough to justify persistent hike pricing.
The report says traders may be overreacting to the earlier oil spike rather than accounting for its reversal, though a lagged pass-through into core inflation remains one possible explanation.
If that hike premium is priced out, the author expects renewed dollar weakness through the rest of 2026 and potentially more upside for U.S. stocks.
With the Fed and markets clashing on rate predictions, which inflation driver—oil shocks or money supply—holds the key?
Why are stocks hitting record highs if markets expect the Fed to raise interest rates, defying classic financial theory?
Can new Fed Chair Kevin Warsh's policies navigate soaring US debt and conflicting economic signals to stabilize the economy?