Internal disagreements within the Federal Reserve over the direction of interest rates are becoming increasingly evident—Bauman is still betting that the Middle East conflict is a short-term disturbance, but the market fears that 'temporary' will turn into 'permanent,' and this expectation gap itself is a source of volatility.

Coin World News reports that Federal Reserve Board Governor Bowman said it is still too early to judge the impact of the Iran war on inflation, and policymakers need to take a “temporary disregard” attitude toward temporary price shocks. Bowman said she supports the decision officials made last month to keep wording in the post-meeting statement that suggests further rate cuts may still be possible. This position sets her apart from an increasing number of policymakers, who want the Fed to send a signal indicating that its next move could either raise or lower interest rates. “As I think about the future direction of monetary policy, I want a clearer understanding of the economic impact of the Middle East conflict and its persistence,” Bowman said. “As long as our commitment to achieving our inflation target remains credible, then it is appropriate to take a ‘temporary disregard’ attitude toward the temporary upside inflation data, driven mainly by rising energy prices.”