Several Fed officials have leaned toward holding rates steady as the U.S.-Iran war and the closure of the Strait of Hormuz raise both oil prices and inflation risks. Federal Reserve Governor Michael Barr is one of those officials, arguing that higher energy and commodity prices will make it difficult to bring inflation down to 2%.
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New trading tool for QQQ bulls“Our current policy stance puts us in a good place to hold steady while we evaluate incoming data, the evolving forecast and the balance of risks,” said Barr.
Jefferson Signals Inflation Pressure as Rate Hike Odds Rise
Furthermore, Federal Reserve Vice Chair Philip Jefferson said that he expects inflation to pick up in the near term from higher energy prices, adding that the current interest rates leave the central bank “well-positioned to determine the extent and timing of additional adjustments to our policy rate.”
At the start of the U.S.-Iran war on February 28, the CME FedWatch Tool showed a 33.7% probability that the Fed would cut rates twice by year-end. The Fed is now expected, with 66.7% odds, to maintain rates for the entire year. In addition, the odds of a 25 bps rate hike are at 26.6% compared to 0% a month ago.