No Cuts Yet
What has President Trump said this week?
〰️
What has President Trump said this week? 〰️
1. Powell’s Last Fed Meeting
The Federal Reserve kept interest rates unchanged at 3.5%–3.75% at its April 29 meeting, widely expected to be Jerome Powell’s final meeting as chair before his term ends on May 15. Markets anticipated the decision, as policymakers continue to balance elevated inflation, slowing job growth, and uncertainty tied to the Middle East conflict (Reuters, 2026). The move comes despite sustained pressure from President Trump for rate cuts and ongoing attention around Kevin Warsh’s nomination as Powell’s successor (CNBC, 2026; NBC News, 2026).
The Fed’s statement framed the decision clearly: economic activity remains solid, unemployment has been relatively stable, but inflation is still elevated, partly driven by rising global energy prices (Federal Reserve, 2026). Officials also highlighted a “high level of uncertainty” and emphasized risks to both sides of their mandate: inflation and employment. The vote reflected some division within the committee, with certain members favoring a 25-basis-point cut, while others preferred to hold steady and avoid signaling near-term easing.
At the same time, a major political overhang has eased. The U.S. Justice Department has dropped its investigation into Powell over alleged cost overruns tied to a $2.5B–$3.1B Fed renovation project, shifting the review to the Fed’s internal inspector general (BBC, 2026). The probe had become a focal point in tensions between the White House and the Fed, with Trump repeatedly criticizing Powell and pushing for lower rates. The investigation’s closure removes a key obstacle to Kevin Warsh’s confirmation, as Senator Thom Tillis had previously withheld support pending its resolution.
Powell’s role remains relevant beyond May 15, as he has indicated a willingness to stay on temporarily to ensure continuity if a successor is not confirmed in time. The key takeaway is twofold: the Fed is not yet ready to cut rates while inflation remains elevated, and markets must now price both the path of monetary policy and the credibility of the transitionfrom Powell to Warsh.
2. U.S. Consumer Sentiment Falls to a Record Low
U.S. consumer sentiment fell to a record low in April, with the University of Michigan index dropping to 49.8 from 53.3 in March, the lowest level since data began in 1978 (Bloomberg, 2026). The decline reflects growing concerns about inflation, job security, and the economic impact of the Iran war, even as some underlying economic data remains relatively resilient (CNN, 2026). Rising fuel costs have been a central driver, amplifying pressure on already strained household budgets.
A key factor is the link between inflation expectations and energy prices. Consumers now expect prices to rise 4.7% over the next year (up from 3.8%), while longer-term expectations have climbed to 3.5%, the highest since October (Bloomberg, 2026). Gasoline prices, around $4 per gallon, remain a focal point, with expectations of further increases continuing to weigh on confidence.
However, sentiment data is not entirely consistent. A separate survey from the Conference Board showed consumer confidence improving slightly, with the index rising to 92.8 from 92.2, supported by stronger views on the labor market and future income prospects. The labor-market differential also improved to 7.5 percentage points (from 6.1), indicating more respondents view jobs as plentiful. At the same time, concerns about energy prices remain elevated, and the broader trend in confidence has been downward in recent years.
This divergence highlights a mixed picture. While consumers report frustration with persistent inflation and rising costs, other indicators, such as strong retail sales and solid corporate earnings, point to a still-resilient economy. The U.S. economy was already under pressure before the conflict, and rising energy costs are now adding strain through weaker sentiment and tighter financial conditions (CFR, 2026).
If energy prices remain elevated and inflation expectations stay high, the risk is that weak sentiment begins to translate more clearly into slower spending and more cautious household behavior in the months ahead.
3. UAE Leaves OPEC
The United Arab Emirates announced it will leave OPEC and its broader OPEC+ alliance effective May 1, marking a significant shift in oil market dynamics. As one of the group’s largest producers, with the second-largest spare capacity, the UAE has long played a central role in stabilizing supply and influencing prices (BBC, 2026; The Washington Post, 2026). The decision reflects growing tensions within the group, as the UAE has pushed for greater flexibility to use its expanding production capacity (CNBC, 2026; Al Jazeera, 2026).
The exit signals a move toward a more independent production strategy, with the UAE likely to increase output beyond OPEC quotas of ~3–3.5 million barrels per day, potentially targeting ~5 million barrels per day. This adds supply flexibility but weakens the coordination mechanism that has historically helped manage volatility (BBC, 2026; The Washington Post, 2026). The timing is critical, as it comes amid an energy shock linked to the Iran war, which has disrupted supply chains and heightened uncertainty across energy markets (CFR, 2026).
Disruptions in the Strait of Hormuz, infrastructure damage, and constrained shipping flows are already pushing energy costs higher, affecting industries from manufacturing to transportation and amplifying economic pressure across regions (The New York Times, 2026). In this environment, a less cohesive OPEC reduces the ability of major producers to coordinate responses to supply shocks, increasing the likelihood of more volatile and less predictable price movements, especially if producers respond competitively (BBC, 2026; CFR, 2026).
Markets have already reflected this tension: oil prices initially fell on expectations of additional UAE supply but rebounded as attention returned to geopolitical risks, with crude still trading at elevated levels (Bloomberg, 2026). More broadly, OPEC’s influence has declined, from controlling ~85% of traded oil in the 1970s to ~50% today, and the UAE’s departure reinforces a shift toward a more fragmented energy system, where greater supply flexibility comes with the risk of sharper and more frequent price swings (BBC, 2026; Bloomberg, 2026).