Interest rate hike odds fell sharply after Fed Chair Jerome Powell expressed opposition to tightening monetary policy in response to the oil supply shock caused by the closure of the Strait of Hormuz. The CME FedWatch tool now shows just a 4.6% chance of a 25 bps increase by year-end, down from 22.2% on Friday.
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Forget margin or options. Here's how the pros trade QQQ“By the time the effects of a tightening in monetary policy take effect, the oil price shock is probably long gone, and you’re weighing on the economy at a time when it’s not appropriate,” Powell said in a speech at Harvard University on Monday. “So the tendency is to look through any kind of a supply shock.”
Powell Says Rates ‘In Good Place’ amid Oil Surge
Powell added that current rates, between 3.50% and 3.75%, are at “a good place” as the Fed assesses the impact of the U.S.-Iran war and tariffs. He also said that the economic impacts of the war are still unclear, although raising rates could have a negative effect on the economy later.
Oil and gas prices have surged since the start of the war on February 28. U.S. consumers are now paying an average of $3.99 per gallon at the pump, up by 34%, or $1.01, over the past month.