Estefano Gomez — Updated just now
Central banks are moving toward higher interest rates as inflation rises after Iran’s reductions in oil supply, making a Federal Reserve rate cut at the June 18 FOMC meeting less likely. A supply shock centered on the Strait of Hormuz has pushed Brent crude above $107 per barrel and led forecasters to raise inflation projections into a roughly 3.1–4.2% range, prompting traders to reassess the odds of a June cut.
Oil-driven inflation complicates the case for policy easing and increases concerns about stagflation, weakening near-term hopes for rate relief. Although market interest in the Fed’s June decision is significant, trading volumes are low, reflecting heightened caution; without sizable trades, market-implied probabilities remain fragile and can be quickly swayed by incoming data or officials’ comments.
Supply losses linked to Iran appear harder to offset than previous sanctions, shifting market expectations and making a “yes” wager on a June cut less appealing unless clear evidence of an economic slowdown emerges or the Fed signals a markedly dovish shift.
Key items to watch: speeches by Fed Chair Jerome Powell and upcoming CPI and PCE releases. Any surprise in inflation or employment data could rapidly change the Fed’s path.
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