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

ME News message, April 9 (UTC+8), Nick Timiraos, the “Federal Reserve megaphone,” said in a post that the ceasefire between the US and Iran provides an opportunity to address the severe threat currently facing the global economy. But for the Federal Reserve, this may just mean swapping one problem for another: continued volatility in energy prices can keep inflation at elevated levels, yet not be severe enough to seriously damage demand—allowing the situation of keeping interest rates on hold to last longer. In its March meeting minutes, the Fed emphasized that the war was not the main reason it was unwilling to cut rates; rather, it made the Fed’s already fairly cautious stance even more complicated. Even before the conflict began, the path to rate cuts had already narrowed. The labor market has been trending toward stability, easing concerns about an economic downturn, while progress toward the Fed’s 2% inflation target has stalled. At its March meeting, the Fed did not change interest rates, partly because it was worried about the risks brought by the war dragging on. The risk that the conflict could weigh on economic growth and lead the economy into recession was once the last—and most compelling—reason to support restarting rate cuts. However, paradoxically, the end of the war in the short term may actually make it harder, not easier, for the Fed to implement easing policies. This is because the ceasefire eliminates the worst economic scenario—severe price increases disrupting supply chains and undermining demand—which, it can be argued, is more important than the risk of removing new inflationary pressures. (Source: Jin10)