"Federal Reserve Mouthpiece": The ceasefire agreement makes it harder for the Federal Reserve to make decisions

ME News Report, April 9 (UTC+8), “Federal Reserve mouthpiece” Nick Timiraos wrote that the ceasefire between the US and Iran provides an opportunity to resolve the current serious threat to the global economy. But for the Federal Reserve, this may just be replacing one problem with another: ongoing volatility in energy prices is enough to keep inflation at a high level, but not severe enough to destroy demand, leading to a prolonged period of steady interest rates. The Fed’s March meeting minutes emphasized that the war was not the main reason for the Fed’s reluctance to cut rates, but rather made the Fed’s already cautious stance more complex. Even before the conflict, the path to rate cuts had already narrowed. The labor market has stabilized, easing concerns about a recession, while progress toward the Fed’s 2% inflation target has stalled. The Fed did not adjust interest rates at the March meeting, partly due to concerns about the risks of a prolonged war. An escalation of the conflict could hinder economic growth and increase the risk of a recession, which was once the last and strongest reason to support restarting rate cuts. However, paradoxically, the end of the war might make it harder rather than easier for the Fed to implement easing policies in the short term. This is because a ceasefire removes the worst economic scenario—severe price hikes disrupting supply chains and damaging demand—which can be said to be more important than the risk of new inflation pressures. (Source: Jin10)