Fed Holds Fire on Rate Hikes Amid Iran Uncertainty

The Federal Reserve is expected to keep interest rates unchanged this week despite growing frustration with inflation, which has been above its 2% target for over five years.

New Fed Chair Kevin Warsh told Congress earlier this month that he had 'no tolerance' for elevated inflation. However, policymakers may hold off on raising rates this week due to concerns about disrupting financial markets.

Fed watchers Joseph Egelhof and Guneet Dhingra at BNP Paribas Securities predict a 'shock rate hike', but more likely, the Fed will wait until its next meeting in September. Only 29% of Wall Street traders expect a rate increase this week, while 76% foresee one in September.

The uncertainty surrounding the Iran conflict is adding to inflation pressure, with oil prices briefly surging past $100 a barrel last week. Christopher Waller, an influential member of the Fed's governing board, has argued that rates must be raised to return inflation to target.