Will there be rate cuts this year? The decision-making power is no longer with the Federal Reserve, but with Iran. The war is entering a critical phase.

The FOMC meeting in the early hours and Powell's remarks were widely interpreted by the market as dovish leaning. But objectively speaking, it's nothing more than the economy being acceptable, employment still having hidden concerns; on inflation, worry that the Iran war will cause expectations to lose their anchor; on interest rates, the level is at a slightly restrictive level.

If we look at it comprehensively and translate it into more plain language, it is: due to the uncertainty of the Iran conflict, there are no conditions for rate hikes, because growth and employment conditions don't support it; nor is there confidence in rate cuts, because we don't know how long the war will last and whether it will cause inflation expectations to spiral out of control.

Therefore, the focus remains on the Iran war.

Recent developments in Iran are undoubtedly escalating, but we need to examine them in detail. Although the US-Israel alliance exists, their goals are not the same. Israel simply wants regime change, but Trump is not opposed to engaging with a new regime. As a result, Iran's Larijani, who is practically the commanding officer, has been decapitated, the intelligence chief has also been decapitated, and the natural gas oilfield (Iran's South Pars oilfield) has also been bombed.

Subsequently, Iran began threatening neighboring oil and gas fields. Iran's intention to drag out a war of attrition is clear, and America's desire for quick victory is also clear.

So the result is that the situation must escalate rapidly in the short term for the conflict to de-escalate early. But the problem is that Iran's Revolutionary Guards are not militia forces like the Houthis. Therefore, restoring pre-war shipping levels appears increasingly unlikely.

To answer the question: regarding rate cuts this year, I still believe there is a chance to begin cutting rates in the second half.

The main reason is: although the Federal Reserve worries about inflation, it may also be overestimating employment and growth levels. Especially the impact of high oil prices is not just inflation—the further squeeze on actual demand and corporate profits remains a concern. As long as time drags on and the issues of employment and growth stalling become evident, inflation will no longer be a problem.