FOMC Minutes Preview: Look For "Easing Bias" Dissent Details Inside Powell's Hawkish Swan Song

U.S. MILITARY: U.S. MARINES BOARDED AN IRANIAN-FLAGGED COMMERCIAL OIL TANKER ON WEDNESDAY Earlier today in the Gulf of Oman, U.S. Marines from the 31st Marine Expeditionary Unit boarded M/T Celestial Sea, an Iranian-flagged commercial oil tanker suspected of attempting to violate the U.S. blockade by transiting toward an Iranian port. American forces released the… pic.twitter.com/1AVT0MudKY

Iran Foreign Ministry: We are negotiating in good faith, and it is up to the American side to prove its seriousness in the negotiations. IRAN'S FOREIGN MINISTRY SPOKESPERSON SAYS EXCHANGE OF MESSAGES BETWEEN IRANIAN, U.S. SIDES CONTINUES BASED ON IRAN'S 14-POINT PROPOSAL - IRANIAN MEDIA U.S. HAS TO PROVE ITS GOODWILL AND END 'PIRACY' AGAINST IRANIAN SHIPS - IRANIAN FOREIGN MINISTRY SPOKESPERSON TELLS STATE TV Iranian Foreign Ministry: Tehran has demanded that the United States release Iranian assets

NEW: Trump and Netanyahu discussed a new effort to reach a deal with Iran yesterday in a difficult call, with one source saying Netanyahu's "hair was on fire" after the call. PRESIDENT DONALD TRUMP AND PRIME MINISTER BENJAMIN NETANYAHU HELD A TENSE CALL OVER IRAN POLICY, ACCORDING TO N12 NEWS. TRUMP ANNOUNCED A "LETTER OF INTENT" TO HALT THE WAR AND BEGIN TALKS WITH IRAN, WHILE NETANYAHU EXPRESSED SKEPTICISM AND ADVOCATED FOR CONTINUED MILITARY…

The manager turned first to an overview of market developments during the intermeeting period. The conflict in the Middle East had continued to be a key factor driving asset price movements. Equity prices had more than reversed their earlier declines, while 2-year and 10-year Treasury yields rose a bit further over the intermeeting period, as did near-term inflation compensation. In foreign exchange markets, the U.S. dollar retraced some of its previous appreciation. The manager observed that the crude oil futures curve was higher than the curve prevailing at the time of the March FOMC meeting. The curve remained steeply downward sloping, consistent with investor expectations of oil prices falling considerably in coming months. The manager noted, however, that the curve's forecasting record was mixed. Next, the manager discussed the recent behavior of inflation expectations. Near-term inflation expectations, as reported in the Open Market Desk Survey of Market Expectations (Desk survey), had again moved up, though expectations for 2027 and beyond were little changed. The survey results and market-based measures of inflation compensation pointed to longer-term expectations remaining well anchored near the Committee's 2 percent longer-run inflation objective. On monetary policy expectations, the manager noted that market-implied expectations still indicated that market participants anticipated little change this year in the target range for the federal funds rate, and options prices implied around a 30 percent probability of a rate hike by the first quarter of 2027. In the Desk survey, the median of the modal paths continued to show two 25 basis point rate reductions over the next year, but respondents now expected them to occur later than in the previous survey, with rate cuts expected in the third or fourth quarter of 2026 and the first quarter of 2027. Nominal Treasury yields had risen modestly further over the intermeeting period. A model-based decomposition of changes suggested that the increase in the two-year nominal yield since the start of the conflict in the Middle East reflected a sizable increase in expected inflation, offset to some degree by a decline in the expected real interest rate, a combination consistent with the realization of an adverse supply shock. A decomposition of the 10-year yield suggested a much smaller increase in expected inflation, alongside an increase in risk premiums. Liquidity conditions in Treasury securities markets had remained favorable even at times of increased volatility. The manager next considered equity market developments. Perceived de-escalation in the Middle East conflict boosted risk sentiment over the intermeeting period, but equity price increases had also been underpinned by strong earnings expectations. After underperforming earlier in 2026, technology-sector stocks recorded the strongest price gains over the period. *FED: MANY PREFERRED REMOVING EASING BIAS FROM STATEMENT *FED: MAJORITY SAW HIKE LIKELY WARRANTED IF INFLATION PERSISTS *FED: SOME WERE CONCERNED INFLATION EXPECTATIONS COULD DE-ANCHOR FED MINUTES: OFFICIALS GENERALLY JUDGED RATE PAUSE WILL EXTEND LONGER THAN PREVIOUSLY THOUGHT Fed Minutes: Several participants indicated rate cuts would be warranted later this year in a scenario in which conflict was resolved soon, and inflation pressures dissipated. Fed Minutes: Some participants were concerned about a scenario in which elevated energy prices and tariffs could result in inflation pressures becoming embedded more broadly.

Iran's President Pezeshkian: Iran has consistently honored its commitments and explored every avenue to avert war; all paths remain open from our side. Iran has consistently honored its commitments and explored every avenue to avert war; all paths remain open from our side. Forcing Iran to surrender through coercion is nothing but an illusion. Mutual respect in diplomacy is far wiser, safer, and more sustainable than war.