Financial News for the Week of May 29th, 2026

It’s been three months since the U.S. and Israel launched the initial attack on Iran. Hopes for a longer-term peace resolution rose this week following President Trump’s comments that a peace deal had been “largely negotiated”. Oil prices fell sharply on the news, though renewed attacks from both sides by mid-week briefly faded the optimism. But by Thursday evening, news outlines were reporting that the two sides had reached an agreement on a 60-day memorandum of understanding to extend the ceasefire, pending President Trump’s approval. Oil prices traded 9% lower on the week and the WTI benchmark currently sits at $88 per barrel. Meanwhile, economic data out this week reinforced a more cautious but still resilient consumer amid renewed inflationary pressures. The S&P 500 edged 1.3% higher on the week, while the 10-Year Treasury yield drifted lower by 12 basis points and currently sits at 4.44%.

This week’s release of the April personal income & spending data offered a fresh dose of reality on the pain being inflicted on American households because of the energy shock. PCE inflation rose to a three-year high of 3.8% year-on-year and is likely to push north of 4% in May alongside a continued rise in gasoline prices. The picture didn’t look much better once the effects of food & energy were removed, with core PCE inflation edging up to 3.3%. Three-and-six-month measures are even hotter, each up 3.8% (Chart 1).

Despite the rise in inflation, the consumer has remained reasonably resilient. Nominal spending rose 0.5% m/m in April, following a stronger gain of 1% in March. After accounting for inflation, April’s gain looked less stellar, but still edged higher by 0.1% m/m. Hotter inflation is also working to erode consumer purchasing power, with real disposable income declining for a third consecutive month. This has left households increasingly reliant on savings to fuel spending. But with the savings rate having slipped to a four-year low, the buffer is looking increasingly thin.

According to a recent survey conducted by the Conference Board, households are reporting softer spending intentions in the months ahead. Fewer households are planning to purchase big-ticket items while two-thirds of consumers plan to reduce overall spending due to higher prices. While the survey metrics have been a less reliable predictor of actual spending post-pandemic, we can’t completely disregard the signal. The energy shock has further strained affordability for lower-and-middle income households, who have not benefited to the same degree from past year’s gains in home and equity prices.

And there’s an increasing risk that affordability pressures could worsen if the energy shock is sustained much longer. A growing chorus of Fed officials are sounding increasingly hawkish amid rising inflationary pressures. Board member Lisa Cook said this week that if disinflation doesn’t soon resume, she would be “prepared to raise rates”. Meanwhile, Fed President Kashkari reiterated that the inflation fight takes priority as the labor market now appears to be in decent shape. This suggests next week’s employment report will play second fiddle to the May CPI numbers due on June 10th. Fed futures are now 60% priced for a rate hike by year-end, but a hotter inflation report could pull forward expectations for a rate hike.

Thomas Feltmate, Director & Senior Economist | 416-944-5730