Fed Likely to Admit Tariff-Driven Inflation Has Been Overstated, Says Tom Lee

It’s Fed Day — and while markets overwhelmingly expect no change in interest rates, with futures pricing in a 98.8% probability of a hold, Fundstrat’s Tom Lee sees potential for a market-moving moment.

Lee isn’t anticipating a rate cut today. But he believes the Fed may acknowledge a key shift in the data: inflation is coming in softer than expected, and the impact from tariffs has been minimal.

“The Fed has cited tariff-related uncertainty as a reason to stay cautious,” Lee notes. “But recent inflation readings — including just a 0.1% monthly rise in the CPI and flat import prices — suggest that pressure just isn’t showing up.”

Real-time import pricing confirms it: tariffs haven’t meaningfully passed through to consumers. And market-based inflation indicators have dropped to their lowest levels in over a year.

“We think the Fed will have to recognize this,” says Lee. “And with partisan bias skewing consumer inflation surveys, markets are starting to price in a return to a more dovish Fed.”

Lee remains bullish, expecting the S&P 500 to push back to record highs soon — it’s already within 3% — and he still sees 6,600 by year-end. As a bonus indicator, he points to bitcoin’s new all-time high as a sign the rally has legs.