Good Afternoon. Warsh's debut policy statement was shorter than any in a decade — and the message was unmistakable: the Fed is done worrying about growth and is back to worrying about inflation. All major indices dropped on the news. Meanwhile, Eurozone inflation came in at a hotter-than-expected 3.2%, and UK inflation held steady at 2.8%, putting the Bank of England in a familiar bind a day before its own decision.

—Rosie, Wyatt, Evan & Conor

🔥 What’s Hot: 🔥

🥶 What’s Not: 🥶

1. Warsh's First Fed: A Hawkish Hold and a Dot Plot With No 2026 Cuts

The News: The Federal Reserve held its policy rate steady at 3.50-3.75% in a unanimous 12-0 vote — Kevin Warsh's first meeting as chair. The real news was the updated dot plot: officials erased the two rate cuts that had been penciled in for the rest of 2026 and now signal one quarter-point hike before the end of 2027. The policy statement itself was dramatically shorter (about 130 words versus 341 in April), with the old "easing bias" language gone and a new line added: "The Committee will deliver price stability." Inflation forecasts for 2026 were revised higher, and growth projections were trimmed.

Why It Matters: Six weeks ago, the market expected the Warsh Fed to fold under White House pressure for cuts. Today's message was the opposite — a clear signal that the new chair plans to defend the Fed's independence and prioritize the inflation half of the dual mandate. Markets are now repricing everything that depends on cheap money: mortgages, growth stocks, REITs, long-dated bonds. The brevity of the statement, modeled on the Greenspan era, is itself a signal — Warsh wants fewer words and more discipline.

What to Watch: Friday's University of Michigan inflation expectations reading, Warsh's first public speech as chair (no date yet), and the 30-year mortgage rate, which is likely to push back above 7% in the coming weeks.

Source: CNBC — Fed holds rates, removes 2026 cuts / Bloomberg — Yields jump on hawkish dots / Barron's — No cuts in 2026, hikes in 2027

2. SpaceX-Tesla Merger Talk Heats Up

The News: Speculation that Elon Musk will combine SpaceX and Tesla into a single mega-company intensified Wednesday after a New York Times report cited people close to Musk saying preliminary internal discussions are under way. Wedbush analyst Dan Ives put the odds of a deal closing within 12 months at 80%, and prediction-market site Kalshi has the contract trading between 45% and 55%. A combined entity would carry a market value of roughly $5 trillion at current prices, instantly making it the second-most-valuable company on earth behind Apple. Tesla shares climbed 4.2% on the report; SpaceX added 2.8%.

Why It Matters: The strategic logic is finally starting to make sense to Wall Street. SpaceX needs Tesla's manufacturing scale to build out Starship and Optimus; Tesla needs SpaceX's AI talent and Starlink distribution to revive its self-driving story. The bigger question is whether shareholders would actually vote for it — Tesla's retail base would likely cheer, but institutional holders worry about diluting a software-margin story with rocket-launch capex. Either way, Musk now controls a corporate empire large enough that even the rumor moves a half-trillion dollars of market cap.

What to Watch: Any 8-K filing from either company disclosing a special committee, Tesla's Q2 delivery report in early July, and a possible Musk all-hands or X post — that is usually how these stories first hit the public record.

Source: NY Times — SpaceX-Tesla merger talks / Bloomberg Opinion — Watch out, Nvidia / MarketBeat — Closer than investors think

3. Boeing Inches Toward 737 MAX 7 and MAX 10 Certification

The News: U.S. and European regulators are nearing final approval for the smallest and largest members of Boeing's 737 MAX family, the MAX 7 and MAX 10, according to officials briefed on the timeline. Both planes have been stuck in certification limbo since 2022, with the FAA demanding extra reviews of the engine-anti-ice system after the 2024 Alaska Airlines door-plug incident. Approval would unlock more than 1,000 deferred orders from Southwest, United, Ryanair, and Delta — a significant backlog tailwind. Boeing shares rose 1.6% to $227.49 on the report.

Why It Matters: For Boeing, this is the most important regulatory unlock in three years. The MAX 7 is Southwest's growth aircraft of choice, and the MAX 10 directly challenges Airbus's red-hot A321neo. Getting both certified before year-end would let Boeing finally restore production cadence at the Renton, Washington plant — the linchpin of CEO Kelly Ortberg's turnaround. The downside risk: any high-profile incident in the next few months could send the certification process back to square one.

What to Watch: FAA's expected final airworthiness directive, EASA's parallel decision (historically lagged the FAA by two weeks), and Southwest Airlines' fleet plan update on its July earnings call.

Source: US News — Approval near / MarketScreener — Regulatory progress

4. Oil Stabilizes Near Three-Month Lows as Hormuz Reopens to Traffic

The News: Crude oil steadied Wednesday after a two-week slide, with WTI holding near $76 and Brent close to $78.60. The Strait of Hormuz officially reopened to commercial tanker traffic this morning following Friday's signing ceremony in Switzerland — the first transit since the 107-day U.S.-Iran conflict began in February. Tanker-tracking firm Kpler reported five vessels through the strait in the first 12 hours, including three Saudi Aramco-chartered VLCCs bound for Asia. Goldman Sachs trimmed its year-end Brent target again, this time to $72 from $74. The U.S. Strategic Petroleum Reserve refill program remains paused.

Why It Matters: The war-risk premium that lifted oil above $90 a barrel in May has now fully unwound, and the question shifts from "how high?" to "how low?" Lower oil is great for U.S. drivers — gasoline could fall another 15-20 cents a gallon over the next month — and it complicates Warsh's hawkish tilt because cheaper energy is itself disinflationary. For the energy majors and the shale patch, $72 Brent is the new break-even debate, and second-half earnings estimates are coming down fast.

What to Watch: Thursday's EIA crude inventories report, OPEC+'s next decision in early August (a defensive output cut is on the table), and U.S. retail gasoline prices for confirmation of the consumer pass-through.

Source: CNBC — Oil stabilizes on Hormuz reopening / Al Jazeera — Prices continue slide

5. Eurozone Inflation Climbs to 3.2% — Highest Since Late 2023

The News: Eurozone consumer prices rose 3.2% year-over-year in May, the highest reading since September 2023 and above the 3.0% consensus, Eurostat confirmed Wednesday. Energy was the main culprit — up 10.8% year-over-year — driven by the conflict-era spike in oil and natural gas. Core inflation, which strips out food and energy, held steady at 2.4%. Country-level readings showed Germany at 2.9%, France at 2.4%, Italy at 2.6%, and Spain at 3.7%. The euro slipped 0.3% against the dollar to $1.0741 on the data, even though the inflation number was, on paper, hawkish for the European Central Bank.

Why It Matters: The ECB cut rates as recently as January and signaled a pause in March, and today's number makes it very unlikely Christine Lagarde resumes cuts before fall — even with growth softening across the bloc. The good news is that the energy component will roll over quickly now that Brent is back near $78, so this is likely the cycle peak. The bigger story is that Europe and the U.S. are both walking back from their dovish 2025 stance at the same time, which is unusual and meaningfully tighter for global liquidity.

What to Watch: The ECB's next policy meeting in mid-July, the June flash inflation reading (early July), and German wage settlement data — the IG Metall round is the bellwether for whether services inflation finally cools.

Source: Eurostat — May HICP confirmed at 3.2% / CoinCentral — Energy drives gain

6. UK Inflation Holds at 2.8% — Bank of England Cornered Again

The News: UK consumer prices rose 2.8% year-over-year in May, unchanged from April and slightly above the 2.7% consensus, the Office for National Statistics reported. Core inflation eased a touch to 3.4% from 3.6%, while services inflation — the metric the Bank of England watches most closely — held at a stubbornly hot 4.7%. Pay growth excluding bonuses came in at 5.1%, well above what would be consistent with the 2% inflation target. The pound was little changed at $1.2864 after the data. The Bank of England announces its own rate decision Thursday at noon London time.

Why It Matters: Andrew Bailey is now in his second straight quarter of policy paralysis: services inflation is too hot to cut, growth is too soft to hike, and the new fiscal package from the Starmer government adds a small but real demand push later this year. Wednesday's data tilts the BoE toward another hold and pushes any cut out to September at earliest. UK gilts sold off modestly, and rate-sensitive housebuilders Barratt and Persimmon declined more than 1%.

What to Watch: Thursday's BoE decision and the meeting minutes (any dissents would be material), Bailey's press conference tone, and June UK retail sales next week — a soft number would shift the debate quickly.

Source: CNBC — UK inflation steady at 2.8%

7. China's Central Bank Hints at a New Policy Framework

The News: People's Bank of China Governor Pan Gongsheng used a high-profile speech at the Lujiazui Forum in Shanghai to suggest the bank will soon shift to an overnight repo rate as its main policy lever — bringing the Chinese rate-setting framework closer to how the Fed and ECB operate. The change, if implemented, would replace the current patchwork of medium-term lending facility (MLF) and loan prime rate (LPR) tools with a single, more market-driven signal. The CSI 300 closed up 0.4%, and the offshore yuan firmed slightly to 7.18 per dollar.

Why It Matters: This is the most significant Chinese monetary plumbing change in 15 years. A clean overnight policy rate would make it dramatically easier for global investors to read the PBOC's intentions and would accelerate Shanghai's ambition to be a true international financial hub. The shift is also a quiet admission that the older MLF/LPR system has lost effectiveness as banks pulled back on lending. Pan is essentially betting that Beijing can fix its weak credit channel by improving the price-discovery mechanism, not by simply easing further.

What to Watch: Any follow-up PBOC press notice on the timeline (likely before year-end), the next MLF operation in late June (a final round before retirement?), and onshore yuan behavior — a cleaner framework would typically support, not weaken, the currency.

Source: Bloomberg — PBOC hints at new framework

Q: What does a baby computer call his father?

A: Data.

A measure of how sensitive a bond's price is to changes in interest rates, expressed in years. A bond with a duration of 7 years will lose roughly 7% of its price for every 1 percentage point rise in rates — and gain about the same when rates fall. Longer-maturity, lower-coupon bonds have higher duration, which is why long-dated Treasuries get hit hardest when the Fed turns hawkish.

Usage: "After Warsh's debut dot plot, traders rushed to cut duration in their portfolios, selling 10- and 30-year Treasuries first and parking the proceeds in 2-year notes and money-market funds."

Grit Capital: Get weekly deep dives on markets, stocks, and investing strategies used by 270K+ investors, hedge funds, billionaires, and advisors. Sign-up here.