Inflation Fears Complicate Fed's Next Rate Decision

The Federal Reserve is facing renewed inflation fears ahead of its next rate decision. Analysts expect the Fed to hold rates steady, but recent hostilities in Iran and rising oil prices have raised questions about the central bank's next move.

New Fed Chair Kevin Warsh has taken a vague approach to signaling how the Fed reads the economy and what direction policy may take. Despite pressure from the White House for lower interest rates, Warsh remains committed to restoring price stability after five consecutive years of inflation running above 2%.

Some Fed officials have signaled their patience on inflation returning to target is wearing thin. A growing chorus of members has projected they would need to raise rates this year, with Dallas Fed President Lorie Logan stating that 'modestly higher interest rates' would better balance the outlook and risks for the FOMC's maximum employment and price stability goals.

Recent economic data has helped lay out a case for waiting. Inflation declined in June thanks to a drop in energy prices, while other goods remained mostly flat in the consumer price index. However, oil prices have jumped back over $100 a barrel following renewed fighting in Iran, adding to the case for the Fed's hawkish members to raise rates sooner rather than later.