Week of June 16, 2025

Dec Mullarkey, CFA, Managing Director, Investment Strategy and Asset Allocation

No surprise this week as the U.S. Federal Reserve kept interest rates on hold. The central bank reiterated that backward-looking data look solid, but emphasized that the forward view is cloudy. Fed Chairman Jerome Powell, in one of his most direct assessment of tariffs, noted that “ultimately the cost of the tariff has to be paid, and some of it will fall on the end consumer. We know that’s coming, and we just want to see a little bit of that before we make judgments prematurely.” In other words, the Fed needs to see how this percolates through the system.

While tariff policy continues to be fluid, tensions in the Middle East have picked up, bringing with them considerable human cost and concerns over global security. Commodity prices are already starting to price in the risk of supply interruptions. Oil prices have been increasing, particularly over the last week, as have prices for wheat, soybeans and corn.  

A significant supply of global fertilizer comes from the Middle East. Iran, Saudi Arabia, Qatar and Oman are all key producers. Any supply interruptions would flow through to food prices and pressure inflation. The Fed’s dashboard still remains a complicated mix of domestic and global challenges – the central bank certainly needs time to see where risk levels settle.

Sources: Bloomberg, Financial Times, 2025.

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