The Federal Reserve is expected to leave its benchmark interest rate unchanged at 3.50%-3.75% this week, sparing Wall Street a market shock while American families absorb more than five straight years of inflation running above the central bank's own 2% target.

Only 29% of Wall Street traders predict a rate hike this week, according to CME FedWatch data. But 76% see one coming by September — up from 59% just a month ago. The calculus is straightforward: the Fed would rather risk disappointing Main Street than disrupting financial markets that aren't priced for a hike.

New Fed Chair Kevin Warsh told Congress this month he has "no tolerance" for elevated inflation. But "no tolerance" apparently means holding steady while consumer prices continue rising at 3.5% year-over-year — down from May's 4.2% wartime spike, but still nearly double the stated target. Warsh, presiding over just his second policy meeting, has adopted what Reuters describes as a "no-guidance regime," providing little explanation and no forward guidance to markets. At his last meeting, the 18 members of the rate-setting committee were evenly split on whether to hike rates this year. At least two regional Fed presidents — Lorie Logan of Dallas and Beth Hammack of Cleveland — have signaled support for higher rates and could dissent from a hold decision.

So why the hesitation? BNP Paribas analysts Joseph Egelhof and Guneet Dhingra spelled it out: policymakers are "reluctant to risk disrupting financial markets that aren't expecting a rate increase yet." Wall Street comfort comes first.

Meanwhile, a significant chunk of the inflation pressure traces directly to foreign entanglements American workers didn't ask for and can't afford. After U.S. and Israeli attacks on February 28, Iran shut down the Strait of Hormuz — the chokepoint for a fifth of global oil and gas. The result, by multiple accounts, was the greatest disruption in oil supplies in history. Oil briefly topped $100 a barrel last week before settling on ceasefire hopes. It's still running $10 to $15 more per barrel than a year ago. Houthi rebels are now attacking Red Sea shipping lanes. Every added dollar per barrel comes out of an American commuter's paycheck and a small business's margin.

Carl Weinberg, chief economist at High Frequency Economics, framed the choice plainly: "Should the Fed set monetary conditions on a hope that oil prices will reverse course and stay low... or should a central bank eschew wishful thinking and do its job?"

Then there's the AI factor. NPR highlighted what other outlets largely buried: massive tech investment in artificial intelligence is propping up both the economy and the stock market while driving up the cost of building materials, electricity, and computer chips. Warsh called AI bullish for the long term but acknowledged "between the short-term and the long-term, it can have a disruptive effect." Translation: asset prices get a boost; everyday costs keep climbing.

The political backdrop is its own grim comedy. Reuters reported that President Trump hand-picked Warsh "with the hope that doing so would open the door to easier policy" — then watched inflation accelerate on his watch. The Powell Fed cut rates three times in 2025; now Warsh may have to give some of that back. Neil Dutta of Renaissance Macro Research put it succinctly: "It's better to do a little now instead of a lot later."

Five years of above-target inflation. A foreign war driving energy costs through the roof. AI inflating asset prices while squeezing real-world costs. And a Fed chair who talks tough but holds steady. The people who own stocks will be fine. The people who buy groceries won't.