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

The FOMC meeting in the early morning hours and Powell's remarks were widely interpreted by the market as hawkish. But objectively speaking, it all comes down to: the economy is still holding up, employment still has hidden concerns; regarding inflation, there is worry that the Iran war could cause expectations to lose their anchor; and interest rates are at a slightly restrictive level.
If we put this together in simpler terms, it means: due to the uncertainty surrounding the Iran conflict, there are no grounds for rate hikes because growth and employment conditions do not support them; nor is there confidence in rate cuts because no one knows how long the conflict will last or whether it will cause inflation expectations to spiral out of control.
Therefore, the focus remains on the Iran war.
Recently, Iran's situation has undoubtedly been escalating, but if we analyze it in detail, despite the US-Israel alliance, their objectives are not identical. Israel aims to overthrow the regime, but Trump does not rule out engaging with a new regime. As a result, Iran's de facto leadership, including Larijani, has been targeted—he was assassinated, the intelligence chief was also killed, and the South Pars gas field (Iran's South Pars oil and gas field) was bombed.
Following this, Iran began threatening neighboring oil and gas fields. Iran's intention to drag the conflict into a war of attrition is clear, and the US's goal of a quick victory is equally clear.
The outcome is that, in the short term, the situation must escalate rapidly so that the conflict can de-escalate early. But the problem is, Iran's Revolutionary Guards are not amateur Houthi forces. Therefore, returning to pre-war shipping levels seems increasingly unlikely.
To answer the question: will there be rate cuts this year? I personally still believe there is a chance to start rate cuts in the second half of the year.
The main reason is: although the Fed is worried about inflation, it may be overestimating employment and growth levels. Especially, the impact of high oil prices is not just about inflation—the further squeeze on actual demand and corporate profits still exists. As time goes on and the slowdown in employment and growth becomes evident, inflation will no longer be the primary concern.