Fed Holds Back on Rate Hike Despite Rising Tensions

Federal Reserve policymakers are growing impatient with inflation, but they may not take action just yet. The central bank is expected to keep its benchmark interest rate unchanged this week despite high prices.

Inflation has exceeded the Fed's 2% target for over five years, and new Fed Chair Kevin Warsh has expressed 'no tolerance' for elevated inflation. However, some analysts predict that policymakers will hold off on raising rates until their next meeting in September.

This decision is complicated by ongoing tensions between the US and Iran, which have driven up energy prices. The average cost of a barrel of oil is $10 to $15 higher than it was at this time last year. While some economists believe that this surge in prices may be temporary, others argue that the Fed must act to prevent inflation from getting out of control.

Fed watchers Joseph Egelhof and Guneet Dhingra suggest that a 'shock rate hike' could be on the horizon, but only 29% of Wall Street traders predict a rate increase this week. By September, however, 76% of traders expect a rate hike to bring inflation back in line with the Fed's target.