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

ME News, April 9 (UTC+8): “Federal Reserve mouthpiece” Nick Timiraos said in a post that the ceasefire between the US and Iran provides an opportunity to address the current serious threat to the global economy. But for the Federal Reserve, this may only mean swapping one problem for another: ongoing fluctuations in energy prices are enough to keep inflation at elevated levels, yet not severe enough to significantly damage demand—so the situation in which interest rates remain unchanged may last even longer. In the minutes of its March meeting, the Federal Reserve emphasized that this war was not the main reason it was reluctant to cut rates; rather, it made an already quite cautious stance even more complex. Even before the conflict began, the path to rate cuts had already narrowed. The labor market has been stabilizing, easing concerns about an economic recession, while progress toward the Fed’s 2% inflation target has stalled. The Federal Reserve did not adjust rates at the March meeting, partly because it was concerned about the risks of the war dragging on. Escalation of the conflict could weigh on economic growth and increase the risk of the economy slipping into recession—once the last and strongest reason for supporting the restart of rate cuts. Paradoxically, however, the end of the war in the short term could make it harder, not easier, for the Federal Reserve to implement easing policies. This is because the ceasefire removes the worst economic scenario—severe price increases disrupting supply chains and undermining demand—which could be said to be more important than eliminating the risk of new inflation pressure. (Source: Jin10)