Central banks to raise rates amid inflation from Iran’s oil supply cuts: FT

Central banks plan to raise rates due to inflation from Iran’s oil supply cuts. Odds for a Fed rate cut at the June 18 FOMC meeting are now lower.

The Strait of Hormuz situation has caused a supply shock, pushing Brent crude prices over $107/bbl. Inflation forecasts now range from 3.1-4.2%, affecting rate cut expectations. The June 18 Fed rate cut market faces challenges, with traders reassessing the likelihood of a rate cut.

Inflation from an oil supply shock complicates central banks’ ability to justify rate cuts, especially with stagflation risks. Optimism about a June rate cut is fading.

Despite the Fed rate decision market’s size, low trade volume shows hesitation. Without concrete trades, market odds remain speculative.

This is a significant shift. Supply losses from Iran are harder to mitigate than past sanctions, altering expectations. A YES share now seems less appealing without signs of economic slowdown or dovish Fed comments.

Watch Fed Chair Powell’s speeches and CPI or PCE data releases. Any unexpected inflation or employment figures could shift the Fed’s stance.

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