May 22, 2026
The minutes from the April 29 Federal Open Market Committee (FOMC) meeting were released Wednesday, confirming what the divided 8-to-4 vote had signaled. Officials acknowledged that the energy shock from the conflict with Iran had raised near-term inflation risks but were split on whether the impulse would prove transitory. Several participants noted that core services inflation remained too firm to justify near-term easing, while others argued the labor market was softening enough to warrant a more accommodative stance once the energy distortion faded. Markets read the minutes as consistent with a Committee inclined to hold rates steady through midyear, and the document underscored the awkward timing of the leadership transition as newly confirmed Chair Kevin Warsh takes the helm.
This week’s data reinforced the divergence between resilient hard data and weakening soft indicators. The preliminary May S&P Global U.S. Manufacturing Purchasing Managers’ Index (PMI) jumped to 55.3 from 54.5, well above the 53.8 consensus and the strongest reading in over two years, while Services PMI eased to 50.9. April Housing Starts eased to a 1,465,000 unit annualized pace, comfortably above consensus, and Building Permits rose to 1,442,000. Initial jobless claims of 209,000 for the week ending May 16 reinforced the constructive labor picture. In contrast, the May Philadelphia Fed Business Outlook collapsed to -0.4 from 26.7, and the final May University of Michigan Sentiment Index fell to 44.8 from the preliminary 48.2, with one-year inflation expectations climbing to 4.8%.
Treasury yields ended the week little changed, while the curve flattened modestly. The 2-year U.S. Treasury yield rose approximately 5 basis points to 4.13%, the 10-year was essentially flat at approximately 4.57% at the time of this writing, with the 2-year/10-year spread 8 basis points flatter to finish the week at 44 basis points. The S&P 500 advanced approximately 0.9% to close near 7,500, a fresh record extending its run roughly 14% above the late-March low. West Texas Intermediate (WTI) crude oil declined to approximately $97.73 per barrel from near $104 the prior week as ceasefire discussions between the United States and Iran progressed, with Brent near $104.51. Gold pulled back to approximately $4,520 per ounce on the Bloomberg spot price as the dollar firmed.
The Chandler team views this week’s data as supportive of our base case that the Federal Reserve remains on hold at 3.50% to 3.75% through our six-month forecast horizon. The weakness in the Philadelphia Fed and University of Michigan readings is notable, but firm manufacturing PMI data, resilient housing, and contained jobless claims argue against the labor market deterioration that would compel the Committee to ease. The reacceleration in consumer inflation expectations is more troubling and reinforces the cautious posture revealed in the April 29 minutes. We expect the next Federal Reserve move to be an ease, with the curve steepening gradually. Portfolios remain positioned with an emphasis on safety, liquidity, and disciplined credit risk management.
Next Week: Chicago Fed National Activity Index (CFNAI), S&P Cotality Case Shiller Home Price Index, FHFA House Price Index, Conference Board Consumer Confidence, Richmond Fed Manufacturing Index, New Home Sales, MBA Mortgage Applications, Durable Goods Orders, Initial Jobless Claims, Continuing Claims, GDP (second estimate), Personal Income, Personal Spending, PCE Price Index, Pending Home Sales, Chicago PMI, University of Michigan Sentiment (final).
Written by Karl Otto Meng, CFA, Portfolio Strategist