The Big City Post
The Federal Reserve chose to hold interest rates steady at a target rate of 3.50%-3.75% at this month’s June 17th meeting in Washington D.C. Currently, this play by the fed is holding steady as the market is currently pricing in next meeting to a 70.1% chance of an interest rate pause, and a 29.9% chance of an increase to 3.75%-3.75% as of early evening EST on June 27th – 10 days after the most recent fed interest rate meeting. The Federal Reserve is functionally in a difficult position because the unemployment rate has held steady around approximately 4.3%-4.5% since about mid 2025. With the introductions of the tariff wars and the global oil supply shock due to the Iran war, we’re heading straight towards a situation where we have no choice but to enter a period of stagflation. Stagflation is a term that denotes a time of simultaneously occurring high inflation and high unemployment. The fed cannot give the labor market the boost it may desperately need by lowering interest rates if inflation is already elevated or even gaining momentum. The most pivotal and determining factor for the mid to long term economic outlook for not only the U.S. but the whole global economy, is the open or close status of the Straight of Hormuz.
President Donald Trump has announced on June 27th, 2026 at 7:13PM that the United States has just struck Iranian missile and drone storage locations. He says,
“United States aircraft just struck Iranian missile and drone storage locations, and coastal radar sites, for violating the Cease Fire Agreement, AGAIN! It is very possible that they will never learn! There may come a point when we are no longer able to be reasonable, and will be forced to militarily complete the job that we very successfully started. If that happens, the Islamic Republic of Iran will no longer exist! President DJT”
As of the most recent statements from President Donald Trump, it does not appear that peaceful negotiations are solving the bulk of the hostilities between the two sides. With the straight of Hormuz likely to still be closed in at least the short term, we can expect that the inflation experienced by the oil shock will continue to trickle down to everyday consumer products and necessities.
With all of this information in consideration, we may be seeing not a pause but instead a rate hike, which as mentioned the odds sit at approximately 29.9% already, for the July 2026 meeting. If we do see a rate hike we can expect reduced hiring and increased layoffs across the broader economy, especially if the fed mentions outright or alludes to more rate hikes in the future. This would not be news the financial markets would respond well to either. There is a lot at risk, and we can’t be sure when or if the Straight of Hormuz will ever be opened.
