The Iran war disrupts the outlook, the Federal Reserve faces dual pressures, and a hawk-dove battle is imminent.

Odaily Planet Daily reports that Federal Reserve officials will hold a meeting this week, and their policy outlook has been disrupted by the Iran war, which has caused one-fifth of global oil supplies to halt. Officials will discuss whether this conflict is more likely to undermine economic growth, trigger more persistent inflation, or create a complex situation where economic slowdown and rising prices coexist.

Considering that supply shocks during the pandemic led to the Fed failing to achieve its 2% inflation target for five consecutive years, policymakers are more likely to adopt a cautious stance this week, possibly even signaling hawkish intentions. The current inflation rate remains about 1 percentage point above the target and is expected to rise further, especially with oil prices soaring nearly 50% in two weeks and remaining high. Officials must also weigh whether this emerging economic shock, which is expected to cause rising prices, tighten financial conditions, depress asset prices, and increase uncertainty, could become a trigger for breaking economic resilience.

Markets expect the Federal Reserve to keep interest rates unchanged at this week’s policy meeting. Data since the last meeting shows little change in the baseline outlook, and the Fed is in a leadership transition—Kevin Warsh, nominated by Trump, is expected to be confirmed by the Senate and take over from Chair Powell in mid-May. Nevertheless, Fed officials will submit new economic forecasts to assess whether future policy needs to maintain tight monetary conditions to combat inflation or cut rates to offset economic slowdown. (Jin10)