Fed Holds Off on Rate Hike Amid Inflation Frustration and Oil Price Uncertainty
The Federal Reserve is expected to keep its benchmark interest rate unchanged at its upcoming meeting in Washington. Despite growing frustration over high inflation, which has exceeded the Fed's 2% target for more than five years, policymakers may not be ready to act just yet.
New Fed Chair Kevin Warsh told Congress that he had 'no tolerance' for elevated inflation, but it's still unclear whether this will translate into action. Some analysts predict a 'shock rate hike', while others believe policymakers will hold off to avoid disrupting financial markets.
The uncertainty surrounding the Iran war and its impact on oil prices is also casting doubt over the Fed's decision-making. The price of oil briefly surged past $100 a barrel last week, but has since settled down due to hopes for de-escalation. However, some economists warn that the conflict could continue to drive up energy prices.
Fed policymakers may be waiting for more economic data before making a move. This includes the Commerce Department's upcoming report on April-June economic growth and the personal consumption expenditures (PCE) price index for June. Only 29% of Wall Street traders predict a rate hike this week, but 76% foresee one in September.