A rate cut is still likely, even after oil jumps 30%

A rate cut later this year remains possible, despite a 30% surge in crude oil prices and the fastest rise in US consumer prices in nearly four years. The jump in inflation was driven by a record increase in gasoline and diesel costs, stemming from a broad supply shock linked to the six-week Iran conflict, which has disrupted energy, food, shipping, and semiconductor markets. Yet, long-run inflation expectations remain low and stable, and short-term upticks are being monitored closely by the Federal Reserve. A majority of Fed policymakers still project at least one rate cut will likely be appropriate in 2024, reflecting ongoing concerns about the labor market. That stance persists even as traders have fully abandoned bets on a cut this year—reversing earlier expectations of two cuts. Former Fed Chair Janet Yellen, speaking at the HSBC Global Investment Summit in Hong Kong, said she would still anticipate a cut later in the year if entering the next FOMC meeting. The next decision will be shaped at the Federal Open Market Committee’s meeting on May 28–29, where updated economic projections will be released.