UpTrajectory Review
TheStreet reports that inflation is heating up again and the Federal Reserve now looks set to hold rates steady rather than cut them. The May Consumer Price Index rose 0.5% from April and 4.2% from a year earlier, the fastest pace since early 2023, while real average hourly earnings fell 0.7% year over year, the steepest drop in more than three years. The culprit is the energy-price spike tied to the Iran war, which has outstripped wage gains and pushed the Fed toward caution. New Fed Chair Kevin Warsh faces his first FOMC meeting June 16-17 with rate cuts largely off the table for now.
For small-business operators, this is a double squeeze. Input costs climb while customers feel poorer, so pricing power weakens at the exact moment margins tighten. Borrowing stays expensive: credit cards, auto loans, mortgages, and most business lines of credit will not get cheaper in the near term. If you planned to refinance debt, expand with a loan, or finance inventory for the back half of the year, the math just changed. Lenders price off the Fed funds rate, and the expected cuts that looked likely in January have evaporated.
What stands out is how quickly the narrative flipped. At the start of 2026, markets priced in as many as two quarter-point cuts; now economists warn of a possible hike if the Strait of Hormuz disruption persists through Labor Day. LPL Financial's Jeffrey Roach told TheStreet that a prolonged crisis could spread the energy shock into additional sectors and strip the Fed of any easing bias. We agree with that read. The risk is not just sticky inflation but a policy mistake in either direction: tightening into a supply shock or easing into entrenched price growth.
The pain will not fall evenly. Energy-intensive businesses, freight, restaurants, and anyone shipping physical goods face the sharpest cost pressure. Service businesses with fixed-rate debt and sticky contracts will feel less immediate strain but still face customers whose real paychecks just shrank. Wage workers lose ground, which eventually shows up as softer demand for discretionary spending. Downstream, expect suppliers to push through price increases with less warning, and expect lenders to keep credit standards tight even for borrowers with solid track records.
Watch the June 16-17 FOMC statement for language about the energy shock and any shift in the dot plot. Track the Strait of Hormuz situation weekly; a reopening could cool oil quickly, while a prolonged blockade hardens the case for a hike. Operators should stress-test budgets at current rates plus another quarter point, lock in fixed-rate financing where possible, and review supplier contracts for fuel surcharges. If you planned a price increase, move sooner rather than later; real wages are falling and customers will not absorb surprises well in the fall.
“Rate expectations could be further upended if this crisis lasts throughout the summer” — TheStreet
Takeaway: Stress-test your budget at current rates plus a quarter point, lock fixed-rate financing now, and revisit supplier contracts for fuel surcharges before fall.
Excerpt from the original — TheStreet
Welcome to our Hot Inflation Summer.Beer, beef, and bikini prices are rising just as our paychecks are shrinking, according to two government reports released June 10. Plus the cost of borrowing money — the interest rates we shell out for credit cards, auto loans, and even mortgages — is unlikely to drop in the coming months.The Federal Reserve is widely expected to keep interest rates on hold as policymakers wait to see the additional collateral damage on the U.S. economy from the Iran war.The May Consumer Price Index accelerated to the fastest pace since early 2023, climbing 0.5% from April and 4.2% from a year earlier, the Bureau of Labor Statistics reported. And in a separate release, the BLS saidreal average hourly earnings fell 0.7% in May from a year earlier, the biggest drop in more than three years.Why? The Iran war’s energy-price spike outstripped pay gains.Fed expected to …