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Fed Decision: No Rate Change, More Hawkish

We are in line with how cautious the Fed has been following the April meeting. Given how complicated the situation in the Middle East has become, we don’t see inflation settling anywhere near 2.5% or below this year, barring severe demand destruction.

We also don’t see any rate cuts this year under this backdrop.

There remains plenty of fiscal stimulus, alongside strong capex and a solid labor market. For now, the risks to inflation should outweigh the risks to the labor market.

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