Source: Fortune
Summary
President Trump’s assurances that the US and Israel’s war with Iran is “very complete, pretty much” have done little to calm concerns among central banks. The conflict has sent oil prices soaring, which could lead to increased inflation and make it harder for central banks to cut interest rates. Macquarie strategists Thierry Wizman and Gareth Berry predict that even if the war ends soon, it will take months for central banks to feel confident that its inflationary impacts have subsided. The Federal Reserve’s next rate-setting meeting will likely see questions over the pass-through of higher oil prices to consumers.
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The numbers tell one story.
Central banks are getting hawkish, with most expected to tilt to the hawkish side of the rhetorical spectrum while oil prices stay high. The Fed’s dual mandate is at play, with inflation and employment both at risk. Markets are pricing out a rate cut, but Bank of America’s Aditya Bhave suggests the Fed may focus on the employment outlook instead. The White House has offered military escorts to ships along the Strait of Hormuz to keep the route open.
The conflict is a dual surprise, with both inflation and employment at risk.
Author: Evan Null
