The US-Israeli war with Iran jacked up inflation in March, but Federal Reserve officials still want to see the situation play out for a little bit first, according to their latest speeches. Many also believe the price shock may be temporary.
That means interest rates are expected to remain unchanged over the next two meetings, slated for later this month and June, Wall Street’s expectations show.
After that, however, it is possible the Fed could hike rates, especially if inflation pressures spread beyond energy and push up so-called core inflation. Several officials even wanted to note the possibility of a rate hike in their policy statement from March, according to minutes from that meeting released earlier this week.
However, Fed Chair Jerome Powell said earlier this month that “the tendency is to look through any kind of a supply shock.” He added that the Fed’s reaction function is largely centered on Americans’ expectations for inflation in the next five to 10 years, which haven’t surged.
