Overview
- Short‑term Treasury yields jumped to multi‑month highs this week as investors raised the odds of higher rates after oil prices rose on renewed U.S.‑Iran tensions.
- The Federal Reserve is keeping the federal funds rate at 3.50%–3.75% and its June dot plot shows a median year‑end rate near 3.8%, leaving cuts unlikely through 2026.
- Markets and economist surveys now expect inflation to stay above the Fed’s 2% goal through 2026, with year‑end forecasts clustered in the mid‑3% range.
- Traders are focused on the June CPI due Tuesday and Chair Kevin Warsh’s testimony on Capitol Hill because those two events could confirm further tightening or allow a more dovish market reaction.
- Persistent drivers — rising energy costs from Middle East tensions, slowly adjusting shelter prices, and tariff pass‑through to consumer bills — make disinflation uncertain and keep borrowing costs higher for households and businesses.