U.S. Navy begins blockade of the Strait of Hormuz, Trump asks Pope to close up

Despite inflation, the Fed may yet cut interest rates

Friday’s inflation number for March—up nearly an entire percentage point to 3.3%, boosted by oil prices increased by the war—has Wall Street debating whether the Fed will deliver any more interest rate cuts this year. Surprisingly, a lot of analysts expect Chairman Jerome Powell to “look through” this burst in inflation and cut rates regardless later in the year. Here’s a sampling of analysts’ opinions:

• “We still think interest rate cuts are more likely than hikes, especially given the Fed’s dual mandate (price stability AND maximum employment).”—ING’s James Knightley.
• “We still expect cuts this year given the Fed’s bias to look through supply-driven inflation, little signs of wage pressures, and political pressure. While risks are tilted towards no cuts, by September, Warsh should be in and have enough evidence of inflation cooling to rally support for a couple of cuts.”—Bank of America’s Claudio Irigoyen and Antonio Gabriel.
• “As long as long-run inflation expectations remain well anchored, we still think the Fed will step in later this year and cut interest rates twice to shore up the labor market in the face of this energy supply shock.”—Bernard Yaros at Oxford Economics.
• “We expect core CPI inflation to drop to about 2¼% by the end of this year, from 2.6% in March, enabling the FOMC to ease policy again to support the teetering labor market.”—Sam Tombs at Pantheon Macroeconomics.
• “With the conflict in the Middle East still unresolved, uncertainty regarding future inflation should keep the Federal Reserve in a wait-and-see mode.”—Vinny Amaru of J.P. Morgan Wealth Management.
• “Since the Hormuz chokepoint was closed for an extended period, we should expect another one or two hot inflation prints…The Fed clearly is on hold for the next several meetings.”—Jeffrey Roach at LPL Financial.
• “From a policy standpoint, the Fed is expected to look through this one‑time energy shock. The bar for a rate hike remains high and no increase is expected in the near term.”—Adam Schickling at Vanguard.

The price of oil today via TradingEconomics.com:

ONE BIG THING

EXCLUSIVE: Citgo CEO imprisoned by Maduro still hopes democracy will return to Venezuela

Watching Nicolás Maduro transported in handcuffs by U.S. officials in January, José Pereira felt a sense of retribution and a release of eight years of pent-up anger: “That is exactly what this guy did to us,” Pereira said of the former Venezuelan leader. “For me, it was like, ‘Wow, now you’re suffering. Now, this is karma.’ I was very glad. It’s not vengeance; it’s justice.” Back in 2017, Pereira was the interim CEO of Citgo Petroleum in Houston. By the end of that year he was in handcuffs in Caracas in a military prison, tried and convicted in a kangaroo court for corruption and treason as one of the “Citgo Six,” accused of signing an agreement that disfavored the Venezuelan government. Fortune’s Jordan Blum has the story.

IRAN

U.S. Navy to begin patrol of Hormuz at 10 a.m. today

Peace talks between the U.S. and Iran broke down over the weekend and President Trump said the U.S. will start a blockade of all ships “Entering or Exiting Iranian Ports” in the Strait of Hormuz starting today at 10 a.m. EST. Vessels bound for non-Iranian ports will not be blocked, Centcom’s notice said.

If it succeeds, cutting off Iran’s oil exports might incentivize China, which buys most of Iran’s oil, to urge Tehran to reopen the strait, according to Fortune’s Jason Ma. It would also deprive the regime of hard currency needed to prop up its war machine.

“Any Iranian who fires at us, or at peaceful vessels, will be BLOWN TO HELL!” Trump said on social media.

The blockade is a new tactic for U.S. forces and, in some ways, a relatively muted response to the failure of the talks. Iran’s uranium supplies remain intact and the regime declined to give up its nuclear program, according to the Wall Street Journal. Forcing Iran to abandon its nuclear weapon ambitions was a key goal for Trump. A resumption of bombing—including targeting civilian infrastructure—was an option the White House considered and rejected, for now.

Pipe down, pope!

Trump blasted Pope Leo last night: “Pope Leo is WEAK on Crime, and terrible for Foreign Policy,” he said, in a lengthy tirade on Truth Social. The slam is an apparent response to the leader of the Catholic Church’s suggestion that Trump should seek an off-ramp from the war. The president also posted a picture of himself dressed as Jesus Christ. 

• The attack came after a report that the White House sent a delegation to Vatican officials to ask that the pope tone down his criticism of Trump. That meeting ended disastrously, according to reports, when one U.S. official went off-script and suggested that the U.S. could set up an alternative papacy if Leo didn’t fall into line.

MORE FROM FORTUNE

This TikTok sensation sold her startup for $2 billion. Now Pepsi is letting ‘Poppi be Poppi’ – Eva Roytburg

Blazing hot IPOs, an AI agent craze, and a new word for ‘token’: Here’s what’s happening in the world of Chinese AI – Nicholas Gordon

Iran’s crumbling economy is the regime’s greatest weakness with prices up 40% since the war began while authorities worry about making payroll – Jason Ma

Intuit was an AI pioneer. Why its stock became a SaaSpocalypse casualty – Geoff Colvin

CHART OF THE DAY

Airline ticket prices track Google search volume for “flights”

Pantheon Macroeconomics’ Samuel Tombs notes that when we all search for “flights,” ticket prices start going up. “The jump in energy prices [in March’s inflation data] also drove the 2.7% increase in airline fares, which boosted [core inflation] by 0.03 percentage points,” he says.

NUMBER OF THE DAY

−11.0%

The return on investment achieved by Anthropic’s Claude Opus 4.6 when it was given historic stats and asked to place bets on matches in the 2023-24 English Premier League season, in a study by General Reasoning. (The AI was blocked from knowing the real results.) Claude, who turned $100,000 into $89,035 over the course of the season, performed the best of eight AI models tested. All the others lost money—and two of them went completely bankrupt. 

THE FRONT PAGES TODAY

Hungary’s Orbán concedes defeat as opposition secures landslide win – FT

Trump threatens 50% tariffs on China as report suggests plans for arms shipment to Iran – CNBC

Eric Swalwell suspends campaign for California governor – Axios

AI Is Using So Much Energy That Computing Firepower Is Running Out – WSJ

ONE MORE THING

A huge number of Americans have no retirement plan

Nearly half of working-age Americans don’t have a retirement account, according to this data from Apollo Global Management chief economist Torsten Sløk. It’s not a surprise that younger workers and poorer workers don’t have savings. But the fact that 20% of the highest earners have done zero prep for retirement is a shocker.