by Estefano Gomez · Just now ago
Central banks are preparing to lift interest rates as inflation rises following Iran’s cuts to oil supply, reducing the likelihood of a Federal Reserve rate cut at the June 18 FOMC meeting.
A supply shock centered on the Strait of Hormuz has pushed Brent crude above $107 per barrel, prompting new inflation forecasts in the 3.1–4.2% range and forcing traders to reassess the odds of a June rate cut. Oil-driven inflation makes it harder for policymakers to justify easing, and raises concerns about stagflation, eroding optimism for near-term easing.
Although the market for the Fed’s June decision is sizeable, low trading volumes reflect caution; without substantial trades, market-implied odds remain tentative and easily swayed by incoming data or comments. Supply losses tied to Iran appear more difficult to offset than previous sanctions, shifting expectations and making a “YES” bet on a cut less attractive absent clear signs of economic slowdown or markedly dovish Fed guidance.
Watch closely for speeches by Fed Chair Jerome Powell and upcoming CPI and PCE releases—any surprise in inflation or employment data could quickly change the Fed’s path.
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Disclosure: This article was edited by Estefano Gomez. For more information, see our Editorial Policy.
