It was another week dominated by war and oil. There were stories elsewhere, but they were overshadowed by the expanding operations in the Middle East and a request for $200 billion from the Department of War which indicates a dawning realization that the war could continue longer than expected. Amid the turmoil in the Middle East, the Federal Open Market Committee (FOMC) met to discuss the fate of monetary policy and the risks to inflation that oil could pose. While there was not much news per se, it was an important week, nonetheless.
Let us start with the most impactful news this week. The FOMC decided to keep interest rates steady for the second consecutive meeting. More importantly, it has lowered its expectations from two rate cuts to just one this year and one next year. While Mr. Powell did not state the obvious, if we read between the lines, he is concerned that the rising price of oil will have a serious impact on inflation. He did make a point of stating that inflation is not coming down as quickly as hoped, citing a lack of progress in goods inflation and persistent tariff-related price hikes. Despite this negative outlook, he explicitly rejected the idea that we are entering a stagflationary environment, noting that while there is a tension between the labor market and inflation, current conditions “do not mirror the 1970’s.”
Perhaps lost this week was the story that the gross federal debt of the United States topped $39,000,000,000,000. This arrives a mere five months after the debt reached $38 trillion, and just seven months after it crossed the $37 trillion mark. This is important because interest payments ($1.04 trillion) have become the third-largest monthly outlay for the federal government behind Medicare and Medicaid ($1.77 trillion) and Social Security ($1.64 trillion). Coupled with higher military spending, an aging population, plummeting fertility rates, and slowing economic growth, it seems adding $2 trillion per year to the national debt is a problem without a solution. Prepare for $40 trillion before the end of the year.
In other news, a strike at the JBS meatpacking plant is driving beef prices even higher. While this strike only involves 3,800 employees, the effect is significant given the slaughterhouse in Greeley, CO, is one of the largest in the US. The union is fighting for higher wages and safer working conditions, while the company reports $566 million in losses through the first nine months of 2025. US cattle production is at a 75-year low causing cattle ranchers to increase their prices. The last time there was a strike at a US slaughterhouse was at a Hormel plant in 1985 and lasted a full year. With the cost of beef at all-time highs, President Trump signed an executive order to quadruple beef imports from Argentina, angering cattle ranchers, union employees, and the slaughterhouse companies themselves. Prepare for yet higher beef prices.
In closing, I came across a story that highlights the adage, “If you’re not paying for the product, you are the product.” Some of you may have participated in the Pokémon GO craze of 2016 when people wandered around public spaces like parks and city centers to “catch” virtual creatures using augmented reality. We learned this week that Niantic Spatial, part of the team from Pokémon GO, recently struck a deal to train food delivery robots using data the game collected from users. The company has built a model that can geolocate down to centimeters using 30+ billion images captured by Pokémon GO users. Sam Altman, co-founder of OpenAI, is an investor in a company called Coco Robotics which will use this tool to teach its 1,000-bot fleet to better navigate Los Angeles, Chicago, and other cities where it operates. Since it works by sight, it is unaffected in urban areas where tall buildings can interfere with GPS signals. Now you know.