• ANALYSIS: The Federal Reserve is widely expected to keep interest rates steady at 4.25% to 4.5% amid heightened uncertainty from Middle East tensions, volatile oil prices, tariff disputes, and a recent U.S. debt downgrade by Moody’s, all of which complicate the economic outlook and policy decisions. Despite political pressure from President Trump to cut rates, analysts anticipate the Fed will maintain its cautious, data-driven approach, holding off on cuts until there is clearer evidence of economic weakness or easing inflation.

If members of the Federal Open Market Committee (FOMC) were hoping to meet with some greater clarity this month, they will be sorely disappointed.

Instead of a clearer path laid out ahead, Jerome Powell and his peers sat down to news of increased geopolitical conflict in the Middle East—potentially pushing up oil prices—as well as ongoing uncertainty over tariff agreements with key partners, and a downgrade of U.S. credit by Moody’s.

Of course, the elephant in the room will be President Donald Trump’s reaction if the FOMC once again refuses to heed his wishes in cutting the base rate.

The melting pot of issues leads most analysts to suspect the base rate will once again be held steady at 4.25 to 4.5%—a relatively tight stance according to dovish economists who argue the economy is coping relatively well according to data.

As David Doyle, head of economics at Macquarie Group, wrote in a note shared with Fortune this week, the Fed is walking a “tightrope.”

“The FOMC is likely to hold rates steady again this week,” Doyle continued. “The market reaction is likely to be driven by the communication and the potential guidance of further cuts. The dot plot may push out the suggested timing of rate cuts. We suspect this may tilt somewhat and suggest 25 bps [basis points] of cuts in 2025 and 75 bps in 2026 (from 50 bps in each year in March).”

Doyle added that Chair Powell “may describe recent inflation developments as encouraging, but also downplay their relevance given uncertainty ahead due to tariffs, fiscal policy, and the recent spike in the oil price due to geopolitical developments.”

The overall expectation from Wall Street is that there will be no change in the base rate, but here are some of the headline factors which may be influencing Chair Powell’s final decision to be announced later today.

Problem 1: Oil

Tensions in the Middle East are escalating by the day after Israel and Iran launched attacks on each other, with both sides targeting senior military officials.

Despite saying the U.S. wouldn’t wade into the conflict, President Trump posted on his social media site, Truth Social, yesterday that “we now have complete and total control of the skies over Iran,” and suggested Iran’s leader, Ayatollah Ali Khamenei, is an easy target despite being in hiding. Khamenei wouldn’t be “taken out … for now,” Trump added.

The escalating tensions in the Middle East pose a question over oil supply, with Iran threatening to close the Strait of Hormuz. The oil flow through the strait accounts for about 20% of global petroleum liquids consumption, writes the U.S. Energy Information Administration.

Vikas Dwivedi, global energy strategist at Macquarie, wrote in a note seen by Fortune: “We expect oil prices to remain volatile with an upward trend for the next few weeks as both Iran and Israel maintain their military intensity. Regardless of military or diplomatic progress, we expect Brent to rally towards the low $80 level before hitting a plateau as the perceived risk of actual oil supply disruption becomes largely discounted.

“From the low $80 plateau, the next price move will, in our view, be driven by what happens to Iranian oil export infrastructure. If it is damaged or destroyed, we believe oil will trend towards $100 due to the direct loss of Iranian exports and the risk premium associated with Iran’s response, including the blockage of the Strait of Hormuz.

“There will likely be selloffs on hopes for diplomatic solutions, profit-taking, and new shorts, but we expect those to be bought until the market ascertains the risk to oil supply.”

None of this makes Powell’s life any easier, as oil is a key factor determining the rate of inflation in the U.S.

Problem 2: Policy uncertainty

Policy out of the White House is also adding further uncertainty to the already blurry picture.

Trump’s “Big, Beautiful Bill” has raised eyebrows about the amount it could contribute to U.S. national debt, despite some deficits being offset by inflationary but moneymaking tariff policies.

The lack of action from the Oval Office isn’t impressing Moody’s, which downgraded U.S. debt a month ago to Aa1 from Aaa. That’s an issue for Powell, with the move pushing Treasury yields up, creating higher borrowing costs for the government that potentially have trickle-down inflationary impacts on consumers.

But as Deutsche Bank’s Jim Reid wrote in a note shared with Fortune this morning: “Ahead of the Fed’s decision, U.S. Treasuries rallied yesterday, on flight to quality, and as the weak data cemented the view that rate cuts were still likely in the months ahead.

“That meant yields fell across the curve, with the two-year yield (–1.5 bps) down to 3.95%, whilst the 10-year yield (–5.7 bps) fell to 4.39%. The outperformance of long-end bonds came after news that the Fed will be holding a meeting on June 25 to discuss changes to the supplementary leverage ratio, which may allow banks to hold more Treasuries.”

Another question is, of course, tariffs, with Powell already signaling he is waiting to see if businesses pass on increased costs to consumers.

Thierry Wizman, global FX and rates strategist at Macquarie, pointed out that level inflation data after the “Liberation Day” tariff announcements wasn’t a signal to bank on, writing the “low May CPI [consumer price index] print isn’t because tariffs don’t matter for measured inflation. Tariffs do matter, or will matter.

“Rather, inflation retreated because underlying notional demand has weakened … We still lean toward the view that Jay Powell will sound more ‘dovish’ next week than he did in May. We believe that were it not for the uncertainty caused by the tariffs, the combined information coming from the inflation and labor-market data would have compelled the Fed to have resumed cutting its policy rate by now.”

Problem 3: Trump

Powell also has to weather the storm that may come in the form of President Trump, who has made it clear that he wants the Fed to cut rates.

While Trump has stepped back from threats that made the market worry that the Fed’s independence might be under threat, he has made no secret of the fact he wants “too-late Powell” to cut the base rate.

Powell, on the other hand, has maintained that politics have absolutely no impact on the Fed’s decision-making.

Despite threats from Trump that he may threaten Powell over the lack of action, Richard Clarida, the former Federal Reserve vice chair from 2018 to 2022, said the White House will stop short of materially altering the central bank’s independence.

“We may be going to a world where the Fed loses some power in the regulatory sense,” Clarida told MarketWatch in an interview published yesterday. “But it looks like the Fed retains independence to raise or lower interest rates.”

On the chairman to follow Powell, Clarida added, Trump’s nomination will not be the only factor: “I think markets can have a say,” he explained, highlighting stocks and bonds would be in for a shaky ride if the candidate for Fed chairman wasn’t viewed as truly independent or committed to bringing inflation down.

This story was originally featured on Fortune.com

© Al Drago—Bloomberg/Getty Images

• Unemployment rates for recent college graduates have surged in recent data, with the rate for those holding a bachelor’s degree rising to 6.1%—and even higher for those with advanced degrees or some college but no degree—contrasting with a national rate of 4.2%. This may strengthen the argument of top CEOs like Jamie Dimon, Ted Decker, and John Furner who have urged young people and employers to prioritize job-ready skills and alternative career paths over traditional college degrees.

Graduates choose to attend college instead of heading straight into the workforce for a range of reasons, be it furthering their studies in a specific field or gaining qualifications needed for a certain role. But their motives often boil down to one thing: landing a career in the profession of their choice.

It seems that in 2025, those dreams are falling flat.

According to the most recent data published by the Federal Reserve Bank of St. Louis (FRED), the unemployment rate for college graduates with a bachelor’s degree sat at 6.1% in May—up from 4.4% just a month prior.

Likewise, the unemployment rate for those ages 20 to 24 with some college experience but no degree, as well as those of the same age demographic with a master’s degree or higher, spiked last month.

FRED reports that Gen Z with a master’s or higher now have an unemployment rate of 7.2% while those with some college experience have an unemployment rate of 9.4%.

According to analysis by the Wall Street Journal, that picture is even more dire. Citing micro data from the Labor Department, the WSJ estimates graduates have an unemployment rate of 6.6% over the past 12 months ending in May, the highest level in a decade with the exception of the pandemic spike.

This trend of increasing unemployment is at odds with the picture of the rest of the U.S., where unemployment held steady at 4.2% from April to May, elevated only a little from the rate 12 months ago.

It’s perhaps no surprise then that the graduates who do land entry-level jobs tend to stay in them, for fear of being stuck in a stagnant market. Meanwhile, grads who didn’t land a role find it difficult to get a foot onto the career ladder.

As researchers from Oxford Economics reflected in a study last month: “Those in the professional, scientific, and technical services are less likely than their peers to seek employment in a different industry, though they are more likely to accept underemployment—defined as a college graduate who is employed in a job where more than 50% of workers in the same role do not have a bachelor’s degree or higher.”

Indeed, while some young potential staffers are willing to take sideways steps in order to earn an income, the analysts suggested Gen Z grads are having a harder time than most: “The upshot is that the unemployment rate for recent college graduates will remain elevated in the near term without a surge in demand from tech companies or a mass exodus from the labor force by these individuals, both of which seem unlikely.

“While these workers only account for around 5% of the workforce, they have played an oversize role in pushing the national unemployment higher.”

Alternative routes

An argument could be made that the data suggests employers aren’t finding the skills they need in newly minted grads, despite the tens of thousands of dollars many will have forked over to achieve their degrees.

JPMorgan Chase CEO Jamie Dimon, for example, has pushed for education reform to rank colleges based on whether its students land jobs as opposed to how many of them graduate.

“If you look at kids they gotta be educated to get jobs. Too much focus in education has been on graduating college…It should be on jobs. I think the schools should be measured on, Did the kids get out and get a good job?” Dimon told Indianapolis-based WISH-TV last year.

The idea that college is the only way to land a well-paid job is also inaccurate, he added, saying 17-year-old bank tellers can take home $40,000 a year “and if you happen to have a family at 18 or whatever, you get $20,000 in medical benefit for your family. You can be a welder, you can be a coder, you could be cyber, you could be automotive—all of those jobs are $40,000 to $60,000, $70,000 a year.”

Dimon, a veteran of Wall Street, has also argued educators should focus on skills which will stand individuals in good stead for the rest of their lives such as nutrition and financial literacy.

The JPMorgan Chase boss isn’t alone. In a WSJ op-ed last year titled “Not Everyone Needs a College Degree,” the CEOs of Home Depot and Walmart U.S., Ted Decker and John Furner, wrote: “Young people have been told for decades that achieving the American dream requires a college degree…While a college degree is a worthwhile path to prosperity, it isn’t the only one.”

They added: “The American dream isn’t dead, but the path to reach it might look different for job seekers today than it did for their parents. We owe it to younger generations to open our minds to the different opportunities workers have to learn new skills and achieve their dreams.”

This story was originally featured on Fortune.com

• Trump’s former Commerce Secretary, Wilbur Ross, warns that while the U.S. has achieved notable progress in trade negotiations, overconfidence could lead American negotiators to push too hard for concessions foreign governments cannot make. He is particularly concerned that “chesty” tactics with complex partners like the European Union could stall agreements—something Jamie Dimon has warned could ultimately strengthen America’s rivals.

As the world’s largest economy, America can be fairly confident in its negotiating power with trading partners. However, the Trump administration cannot overplay its hand as it may result in allies being pushed into the arms of rivals, according to experts like former Commerce Secretary Wilbur Ross and JPMorgan Chase CEO Jamie Dimon.

This is a scenario which Dimon has sounded the alarm on since Trump made his tariff agenda public. Writing in this year’s letter to shareholders, the “white knight of Wall Street” wrote that America first is “fine” as long as it doesn’t result in “America alone.”

Meanwhile Ross, President Trump’s former commerce secretary, is concerned that the administration’s Achilles’ heel may prove to be its confidence—potentially spurred by quickly signing framework deals with the likes of the U.K. and China.

Ross said that overall he believes President Trump and his team are handling negotiations well and have already achieved some major goals. But he added his one fear is that the government may get too “chesty.”

He told Fortune in an exclusive interview: “The very fact that they’ve made as much progress as they have shows the basic power of the U.S. to get people to come around.

“In fact my one fear is that if our government feels too chesty with their progress, they may overplay the hand and get to levels that are hard—maybe even impossible—for the other countries to give in. That’s my biggest worry right now, because it’s easy to get carried away with early successes.”

As well as a deal with the U.K. being reached and a framework with China, positive signals are also coming out of talks with India and Japan.

“What I think is very important [is] … even though they’ve taken initiatives with some 70-odd countries, in reality, there are only about four or five that make a lot of difference because they’re the ones that move the needle, and [Trump] seems to be doing pretty well,” Secretary Ross added. 

“With, I would say, the exception of the EU … It’s very difficult for the EU to make trade concessions because it‘s not really one entity. You’ve got the 27 member states, and each one of those has a different set of objectives, but each one has veto power, so it’s very tough to get a deal with the EU.”

The EU may be one of the “slower” deals, he added, while Japan, China, and Vietnam he expects to be “fairly quick.”

Problem areas

The European Union, which Trump has previously claimed was created with the sole purpose of working against America, is among the regions most likely to pose a problem if the Oval Office is too confident in its approach, said Secretary Ross.

Already, the president has vented his frustrations with a lack of progress when it comes to negotiating with the EU, previously posting an outburst on Truth Social saying the EU would be facing a 50% tariff because of its lack of action. This 50% tariff was then paused for 90 days.

When asked by Fortune which region may lead to a stalemate in talks, Secretary Ross said: “The EU is definitely a possibility, simply because it’s hard for them to take a united front. 

“But someone like a Vietnam, on whom he has imposed huge tariffs … That one frankly surprised me a little bit in that the reason our trade deficit suddenly shot up with Vietnam is there was a lot of factory movement from China to Vietnam.”

Keeping the European Union close in particular is a key concern of Dimon’s, on account of its history and the potential fragmentation of the bloc.

“This is going to be hard, but our country’s goal should be to help make European nations stronger and keep them close. If Europe’s economic weakness leads to fragmentation, the landscape will look a lot like the world before World War II,” he wrote earlier this year. Such fragmentation, over time, would increase European dependency on China and Russia, essentially turning Uncle Sam’s former allies into “vassal states” of its rivals.

This story was originally featured on Fortune.com

© DON EMMERT—AFP/Getty Images

• Former Commerce Secretary Wilbur Ross, a key architect of Trump’s first-term economic agenda, explains that the administration’s use of tight 90-day deadlines and tariff pauses is both a negotiation tactic and a way to fit the political calendar, particularly before Congress shifts focus to mid-term elections. Ross acknowledges that while these deadlines have been effective in speeding up trade talks and showcasing U.S. leverage, their repeated use may be losing impact as negotiating partners begin to expect extensions rather than serious penalties.

When it comes to renegotiating deals with foreign economic powers, time is of the essence for the Trump 2.0 team.

Not only will tight timelines keep pressure on negotiations to resolve quickly, it also shows voters that the White House has the entrepreneurial wherewithal to make things happen on a rapid timescale.

President Trump has wielded breaks in tariffs of approximately three months a number of times. Most notably, having announced his ‘Liberation Day’ tariffs in early April, a week later he announced all proposed rates would be cut back to 10% for 90 days.

The same has since been announced for China, with both Beijing and Washington D.C. agreeing to lower rates by 115% respectively while talks continue.

And a combination of external pressure, but more importantly internal optics, is precisely why the president has developed a penchant for 90-day pauses.

That’s according to Trump’s former Commerce Secretary, Wilbur Ross, who served in the first administration after being appointed in 2017.

Secretary Ross was a key architect of Trump’s economic agenda in his first term, overseeing the introduction of tariffs on China and the renegotiation of trade with Canada and Mexico.

He told Fortune in an exclusive interview that while a deadline helps in trade talks, Trump is also likely eyeing his own political calendar.

He explained: “There’s nothing like a deadline to encourage people to negotiate seriously. I think it’s right that he did it.”

But further “it fits the congressional timetable”, Secretary Ross explained: “I think he felt that he had to get this out there and try to get it in place early, because by around September everybody in the Congress is mainly going to be focusing on the mid-terms and therefore, the chances of them doing anything controversial are small.

“In history the senators always had a big voice in tariffs—so far he hasn’t given them any voice, and there’s always the danger that they will suddenly start to exert a voice. So I think he wanted to get that out of the way.”

Secretary Ross added that with a bit of “slippage” on 90-day pauses, deadlines get “very close to September.”

Moreover, the banker-turned-Washington-power-player added the tactic of pauses is becoming less of an eleventh-hour reprieve and more of an expectation.

“It was a good tactic and a useful one,” Secretary Ross said. “It gets less useful … because people start to take it less seriously than they did in the beginning.

“So far, I don’t think there’s a single one where he really has imposed a big penalty if he had to make an extension, so it I think it was a useful tool but it’s probably a little less powerful going forward.”

Unusual timelines

Of course, everything about Trump’s tariff timelines is unorthodox: Usually trade deals take years from proposal to sign-off, let alone inking an agreement in a matter of months.

That being said, the Trump team has been scrutinized for whether it could stick to its promises of deals being announced in rapid succession over the summer.

Indeed, analysts have grown increasingly uneasy with Treasury Secretary Scott Bessent’s claim that “first movers” would get better deals after the ‘Liberation Day’ tariffs—especially since agreements that were supposedly “done, done, done” have yet to materialize.

So far the framework of a deal has been reached with the U.K. while a truce with China has been declared, but more comprehensive agreements are yet to be revealed.

“When you consider the fact that historically it takes years, not weeks, to negotiate individual trade deals, these are going at lightning speed,” Secretary Ross said. “The very fact that he’s gotten this far is pretty amazing, especially because we don’t have that much bandwidth. The whole U.S. trade rep staff, the entire staff, counting the receptionist, there’s only about 200 people, and they have lots of other tasks to do [like] monitoring old agreements and such. 

“Even Commerce has a limited number and so does Treasury, so the very fact that they’ve made as much progress as they have shows the basic power of the U.S. to get people to come around.”

This story was originally featured on Fortune.com

© Andrew Harrer—Bloomberg via Getty Images