Trump’s war jolts global central banks from Fed to ECB to BOJ
View original at finance.yahoo.comTrump’s war jolts global central banks from Fed to ECB to BOJ (Bloomberg) — Central banks from Washington to London to Jakarta are about to make their first assessments of economic damage after more than two weeks of conflict between the US and Iran…
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For the Fed, much depends on how the conflict evolves. If the war ends quickly, we expect the unemployment rate to edge higher and core inflation to cool, allowing rate cuts of about 100 basis points this year. If the conflict drags on, keeping energy prices high and pushing inflation expectations higher, the calculus becomes far more difficult.
60% confidenceEconomists see a smaller increase in producer price measure of wholesale costs in February than in January, when services prices jumped
60% confidenceInterest-rate bets that fully anticipated easing in the US have eroded, while possible hikes in the UK and euro zone later in the year are now being priced in
60% confidenceThe combination of labor market tremors and Middle East war puts the Fed's dual mandates in conflict, clouding the outlook for rates in the near-term
60% confidenceFor the Fed, much depends on how the conflict evolves. If the war ends quickly, we expect the unemployment rate to edge higher and core inflation to cool, allowing rate cuts of about 100 basis points this year. If the conflict drags on, keeping energy prices high and pushing inflation expectations higher, the calculus becomes far more difficult.
60% confidenceDecisions in the coming week are likely to confirm to investors that the specter of a new inflation shock is already worrying enough to prompt heightened caution
60% confidenceFor the Fed, much depends on how the conflict evolves. If the war ends quickly, we expect the unemployment rate to edge higher and core inflation to cool, allowing rate cuts of about 100 basis points this year. If the conflict drags on, keeping energy prices high and pushing inflation expectations higher, the calculus becomes far more difficult.
60% confidenceThe Fed is widely expected to hold rates steady at March 17-18 policy gathering
60% confidence
Data points we hold from this source
| Board of Governors of the Federal Reserve System · interest rate cuts forecast | 100 basis_points |