US crude oil sat near a two-month low and Wall Street traded close to flat on Wednesday morning, as investors held back ahead of Kevin Warsh's first interest-rate decision as Federal Reserve chair, due at 2 p.m. Eastern. West Texas Intermediate was around $77 a barrel, having rebounded marginally from Tuesday's close of $76.05, its weakest level since the spring.
Crude has fallen sharply through June, sliding from above $96 a barrel on June 3 as a US-Iran agreement calmed fears over the Strait of Hormuz, the conduit for roughly a fifth of the world's oil. The deal is expected to be formally signed Friday, with the strait reopening to commercial traffic without tolls, a prospect that has steadily drained the war-risk premium from prices.
The Fed decision is the day's main event. Futures markets had priced the probability of an unchanged target range of 3.50% to 3.75% at roughly 97%, which would extend a pause that began in December 2025. The interest for traders lies less in the rate itself than in Warsh's debut press conference at 2:30 p.m. and the updated quarterly projections, including the closely watched 'dot plot'.
Warsh, confirmed by the Senate in a narrow 54-45 vote in May and sworn in on May 22 as the 17th Fed chair, has signalled a 'less-is-more' approach to forward guidance — a style that could reduce the central bank's predictability and add to market volatility. Analysts broadly expect the new projections to eliminate the single rate cut policymakers had pencilled in for this year in March.
The inflation backdrop argues for caution. May consumer prices rose 4.2% from a year earlier, well above the Fed's 2% target, with energy costs up about 23.5% on the year and core inflation at 2.9%. Hotter readings during the Iran conflict have kept the prospect of any easing remote.
Data released Wednesday underscored the economy's resilience: retail sales jumped 0.9% in May, against forecasts of 0.5% and April's 0.4% gain. Semiconductor shares steadied after a slide earlier in the week, and the Dow Jones Industrial Average had pushed to a record in recent sessions, with the S&P 500 trading around 7,520.
For now, markets are caught between competing forces — a steep drop in oil that eases the inflation outlook, against still-elevated price data and a new Fed chair whose reaction function investors are only beginning to read. The afternoon's decision and Warsh's first remarks are likely to set the tone for the rest of the summer.