Global Calm, Falling Crude, and Fed Pressure: Are Rate Cuts Finally on Deck?

Amongst recent chaos – from heated policy disputes to geopolitical flare-ups – the U.S. economy is flashing encouraging signals. Stocks are hovering near record highs while inflation has been steadily easing. A ceasefire abroad and hopes of policy easing at home have helped keep consumer and investor confidence intact. After examining both sides of the current debates, a neutral analysis still reveals reasons for optimism that conditions will continue to improve.

📈 In this week’s Market Pulse:

• 🛢️ Oil prices drop despite war, signaling markets expect short-lived conflict

• 🏛️ Growing bipartisan pressure on Jerome Powell to cut rates or resign

• 📉 Inflation continues to trend lower, fueling rate-cut optimism

• 📊 U.S. stock indexes approach all-time highs on positive economic signals

• 🇺🇸 Tariff fears cool as experts say price impact remains muted

Tariffs, Inflation, and a Resilient Economy

One contentious issue is the impact of tariffs on prices. Federal Reserve officials have voiced concern that renewed trade tariffs could stoke inflation, which makes them hesitant to loosen monetary policy. However, the White House’s economic team offers a more positive take. Council of Economic Advisers Chair Stephen Miran argues there is “zero evidence of material inflation as a result of tariffs”. Indeed, the data shows inflation has been coming down despite tariff actions. Annual consumer price inflation cooled to about 2.3% in April – the lowest rate since early 2021. Even President Trump has declared that everyday costs like groceries, gasoline, and energy are “down with no inflation”, insisting “we have no inflation” at this point. In short, while tariffs were feared to raise prices, so far inflation continues to trend lower, suggesting the economy’s resilience in absorbing trade measures.

Calls Grow for Fed Rate Cuts as Inflation Falls

Despite inflation’s decline, the Federal Reserve under Chair Jerome Powell has kept interest rates elevated – a stance now drawing loud criticism from outside the Fed. Federal Housing Finance Agency Director Bill Pulte blasted Powell for “improperly keeping interest rates high” and doing “a great injustice to this country” by refusing to cut rates. Pulte notes that 30-year mortgage rates have surged from around 3% to 7%, which has “crushed affordability” in the housing market, even though “inflation is down” markedly. He and others argue the Fed should provide relief: “Powell needs to lower interest rates today, and if not, Chairman Powell needs to resign, immediately,” Pulte wrote, urging that rates be slashed now that President Trump has “crushed inflation” . These calls are not isolated – President Trump himself has lambasted Powell, calling him “the WORST…costing America $Billions” and even an “American Disgrace” over the perceived economic damage of high rates. Critics suggest Powell’s reluctance to ease policy now (when inflation is retreating) contrasts with past episodes where the Fed cut rates even with inflation running higher, fueling accusations of partisan inconsistency.

That said, there is another side to this debate. Some economists maintain that interest rates may still be too low to fully tame inflation. For example, commentator Peter Schiff counters that by many measures (such as continued heavy borrowing and a low savings rate), the current rates are “still too low”, warning that loose policy could reignite price pressures. This underscores the Fed’s delicate balancing act: it must ensure inflation is truly defeated without derailing the economy. Nonetheless, the prevailing sentiment outside the Fed has clearly shifted toward favoring rate cuts, given the welcome progress on inflation and the need to support growth.

Ceasefire Brings Oil Prices Down and Inflation Relief

Global energy markets have also handed the economy a positive surprise. In the Middle East, a short but intense conflict between Israel and Iran was halted by a U.S.-brokered ceasefire after roughly 12 days of hostilities. Remarkably, oil prices remained relatively contained throughout the turmoil, reflecting the market’s expectation that this “12-Day War” would be short-lived and contained. Brent crude oil jumped about 15% at the peak of the conflict, but this increase was “relatively modest” given the high stakes, and prices quickly returned to pre-conflict levels once a truce was in sight. In fact, on news of the ceasefire, oil fell 6% in one day to about $67 per barrel – the lowest since before the fighting began. As one analyst noted, the entire Middle East “geopolitical risk premium” that had built up “has entirely vanished”, and traders were “right not to panic” because the worst-case disruptions never materialized. The feared scenario of Iran blocking the Strait of Hormuz (a chokepoint for 20% of global oil) did not occur, and there was almost no actual disruption to oil supplies during the conflict.

If anything, the quick resolution has reinforced a bearish outlook for oil. A wave of pent-up Persian Gulf crude supply is now hitting an already oversupplied global market – one reason Brent crude was trading under $70 this week. With demand entering a seasonal summer peak and still not outpacing supply, many expect an outright glut to become evident; in the words of one industry observer, “oil prices are heading down – quite a lot.” The brief price spike even spurred more output: major producers in OPEC+ have quietly raised exports, and Iran’s oil production surprisingly climbed to a seven-year high (above 3.5 million barrels per day) despite nearly two weeks of airstrikes. U.S. shale companies, seeing oil temporarily near $78, locked in future prices and are poised to drill more than they otherwise would. In short, the world finds itself “swimming in oil” after this conflict, with supply-demand imbalances worsened in favor of excess supply. This is unequivocally good news for inflation: cheaper oil and energy should help drive overall price growth even lower in coming months, easing pressure on consumers.

Market Near Highs on Rate-Cut Hopes and Economic Strength

For investors, these developments have translated into renewed optimism. U.S. stock indexes – the Dow, S&P 500, and Nasdaq – are trading near record highs, buoyed by the dual tailwinds of potential Fed rate cuts and cooling global risks. Markets have been rallying broadly across sectors, reflecting “positive economic signals and cooling inflation pressures” that underpin the current economic landscape. Tech giants and other growth stocks are climbing strongly, but even interest-sensitive sectors like housing and finance have stabilized on the prospect that borrowing costs may soon fall. On Tuesday, the S&P 500 notched its highest closing level since earlier in the year, and futures indicate investors remain bullish yet watchful.

Federal Reserve signals have further fueled the market’s optimism. In testimony to Congress, Chair Jerome Powell indicated officials could begin lowering interest rates “sooner rather than later,” a hint that rate reductions might arrive earlier than previously thought. This dovish shift has traders betting that a rate cut could happen as soon as this September if economic data cooperates. Investors are eagerly awaiting upcoming inflation reports (like the Fed’s preferred PCE index) and other indicators – if those continue to show benign inflation or further improvement, the Fed will have more flexibility to ease policy. Such a move would likely provide another boost to both the stock market and interest rate-sensitive parts of the economy. At the same time, the calming of Middle East tensions has removed a layer of uncertainty, with the ceasefire “adding stability” to the global outlook. As a result, market sentiment is broadly optimistic that the second half of the year could see stronger growth with lower inflation, a near “goldilocks” scenario.

Of course, the situation is not without risks – the ceasefire abroad is fragile, and the Fed at home insists it will remain data-dependent. But for now, Wall Street appears cautiously hopeful. Analysts note that if upcoming events support the narrative of falling inflation and imminent rate cuts, stock indexes could break out to fresh all-time highs in a new bull phase. Until that evidence is clear, traders are staying vigilant yet optimistic, encouraged by how far the economy has come in taming inflation and weathering turmoil.

In summary, even after weighing the more pessimistic voices against the optimistic ones, the balance of recent trends points to an improving economic environment. Inflation is receding, energy prices are contained, and growth remains on track – all suggesting the chaos of last year is giving way to calmer, better times ahead. With sensible policy adjustments (like well-timed rate cuts) and a bit of luck on the global stage, many expect the rest of this year to bring lower inflation, lower interest rates, and even stronger economic performance. The data so far certainly give reason to share that cautiously positive outlook.

Interested in how we’re positioning ourselves amid today’s shifting economic landscape?I’m always happy to connect. Feel free to DM me directly to discuss how Everstead is navigating this environment with a focus on resilient, cash-flowing opportunities.

— Douglas Swift

Managing Partner, Everstead Equity Group

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