The June Cut Thesis Is Dead
On Polymarket: Fed Decision in June? ↗With CPI at a four-year high, an Iran-driven oil shock still burning, and bond markets pricing zero 2026 cuts, a 91% probability on a June Fed cut is the clearest mispricing we see right now.
Current view — April 14
The inflation picture that arrived with March's CPI report is not the kind the Fed can wave away. Consumer prices climbed at their fastest pace in nearly four years last month, with the Iran war's oil shock and persistent tariff pass-through cited as the twin engines driving the overshoot. Neither of those forces is dissipating on a June timeline. When the two largest components of a price surge are a regional military conflict and a multi-year trade policy, the FOMC does not get to call them noise.
The tariff piece deserves its own moment. Fed economists, as reported by Nick Timiraos, estimate that tariffs in place through late 2025 raised core goods prices by 3.1 percent through February — accounting for essentially all of last year's overshoot in that category. That pass-through is described as largely complete, which means the base has been permanently re-set higher before the Iran escalation even enters the calculation. The Fed is not looking at a clean slate on which it could justify easing; it is looking at a floor that has been raised, with fresh upward pressure now sitting on top of it.
-Raised core goods prices by 3.1% through February (i.e., all of last year's overshoot in this category) and core PCE by 0.8%
-The pass through should be complete https://t.co/FuAntv32Li pic.twitter.com/IKNOnpPS3t
The market structure confirms what the macro is signaling. Traders are not hedging around a June cut — they are holding outright bets on no action across all of 2026, and that positioning has not softened. Wells Fargo Investment Institute, which previously had two cuts penciled in for this year, has reversed that call entirely. Zero cuts in 2026 is now the single most likely institutional outcome. When sell-side desks publicly walk back their base case, the direction of travel is unambiguous.
Markets now price zero Fed rate cuts as the most likely outcome, with odds rising sharply.
Wells Fargo has also shifted, now expecting no cuts in 2026, reversing its prior call for two.
"WELLS FARGO INVESTMENT INSTITUTE EXPECTS US FED TO KEEP INTEREST RATES… pic.twitter.com/NQIoCKNkvv
The Fed's own voice has been equally clear. Governor Daly stated explicitly that the oil shock means bringing inflation down will simply take longer. That is not hedged language from a centrist trying to keep optionality open — it is a sitting, voting member of the FOMC telling markets that the timeline to accommodation has extended. The retail argument that Trump's political pressure or equity market turbulence will force Powell's hand by June misreads how the institution actually responds to stress. Emergency liquidity facilities, not scheduled rate cuts, are the Fed's tool of choice when markets seize.
The range of opinion in the Polymarket comment section is itself instructive. The most structurally coherent contrarian voice we see is not arguing for a cut at all — it is arguing for a hike, on the grounds that the Iran situation and rising oil demand a tighter posture. We do not share that view, but it illustrates how far the analytical center of gravity has moved from the June-cut thesis. When the people pushing back on consensus are pushing in the opposite direction from the YES buyers, the YES buyers are isolated.
The June meeting will almost certainly produce a decision to hold, and the data available today gives the Fed every institutional reason to frame that hold as the responsible choice rather than a reluctant pause. The question is not whether the cut happens — it is why a market priced for near-certainty of easing exists at all.