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

ME News, April 9 (UTC+8), “Federal Reserve’s megaphone” Nick Timiraos said in a post that the ceasefire between the U.S. and Iran provides an opportunity to address the serious threat the current situation poses to the global economy. But for the Federal Reserve, this may only be swapping one problem for another: continued volatility in energy prices is enough to keep inflation at relatively high levels, yet not severe enough to significantly disrupt demand, thereby allowing the situation in which interest rates remain unchanged to persist even longer. The Federal Reserve’s March meeting minutes emphasized that this war was not the main reason the Fed was unwilling 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, and progress toward achieving the Federal Reserve’s 2% inflation target has stalled. At its March meeting, the Federal Reserve did not adjust interest rates, partly due to concerns about the risks associated with the war dragging on. The risk that escalation could weigh on economic growth and lead the economy into recession had once been the last—and most compelling—reason supporting the restart of rate cuts. Ironically, the end of the war in the short term may actually make it harder, not easier, for the Federal Reserve to implement easing policies. This is because the ceasefire agreement eliminates the worst economic scenario: severe price surges that disrupt supply chains and undermine demand—which can be argued is more important than eliminating the risk of renewed inflation pressures. (Source: Jin10)