Iran, oil spikes, and a divided Fed

A divided Fed

The Fed released its June meeting minutes, showing a 9-to-8 split on whether to raise interest rates before year end. Nine officials saw at least one hike coming, eight said hold, one wanted a cut.

Three things were keeping inflation stubborn: leftover tariff costs working through supply chains, energy disruptions tied to the U.S.-Iran conflict, and surging electricity demand from the AI buildout.

Markets and oil

The U.S. struck over 90 Iranian military targets on July 7 and 8. Iran launched retaliatory drone and missile attacks on U.S. bases in Kuwait and Bahrain. Oil spiked 4.4% in a single day before pulling back. The Dow dropped 577 points on Wednesday, then recovered Thursday as chip stocks rallied and oil settled near $73 a barrel.

For federal employees

OPM finalized a rule on July 7 letting agencies cap how many workers receive top performance ratings. The “minimally successful” rating is gone, merging with “unacceptable,” which triggers disciplinary action. Agencies have until January 2027 to comply. If your annual review is coming up, pay attention to how your agency implements this.

For federal retirees

For those collecting the FERS annuity supplement, the earnings test hits the July paycheck. The 2026 limit was $24,480. Earn more, and OPM reduces the supplement $1 for every $2 over the line. Wages and self-employment count. TSP withdrawals and investment income do not.

The 2027 COLA was shaping up larger than 2026’s 2.8%, with early estimates between 3.6% and 4.7%. FERS retirees receive a reduced COLA, capped when inflation runs above 2%.

Read the OPM interim pay decision guide.

Household debt

The NY Fed reported credit card delinquencies at 13.1%, the highest in 15 years. Auto loan delinquencies hit a record 5.6%. Total household debt approached $19 trillion.

For business owners

NY Fed data showed 47% of service firms and 44% of manufacturers planning more tariff-driven price increases, with most not finished passing costs through. If your business imports anything, build that into pricing now rather than later.

Sources: Federal Reserve; Federal Reserve Bank of New York; CNBC; OPM.gov; MyFederalRetirement; Kiplinger; Bloomberg.

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This is educational information, not personal advice. Figures and program rules cited reflect the date of publication and can change. Consult qualified tax, legal, and financial professionals about your own situation.

Investment advisory services offered through Hornor, Townsend & Kent, LLC (HTK), Registered Investment Adviser, Member SIPC, www.htk.com. Life Capitalized Financial LLC is not affiliated with HTK. The material is not intended to be a recommendation, offer or solicitation. HTK does not provide legal and tax advice.