Analyst: Escalating Iran-Israel Tensions May Disrupt Fed Rate Cut Plans

According to ChainCatcher, the Federal Reserve is expected to maintain its current interest rate levels in this week’s latest decision. Market attention will focus on whether the Fed signals any clues regarding the timing of future rate cuts.

Recently released CPI and PPI data came in weaker than expected, prompting market participants to move up their expectations for the next rate cut. The money market has now fully priced in the possibility of a rate cut in October this year, with a significant chance that action could even be taken as early as September.

Previously, the consensus was that rate cuts would not occur until December. Citi analysts have pointed out that the market may currently be underestimating the risk of rate cuts. However, new U.S. tariffs could push inflation higher, and if tensions between Iran and Israel escalate further, leading to a continued rise in oil prices, this could further delay the Fed’s rate-cutting process.

Allianz analysts noted that against the backdrop of elevated inflation, the Federal Reserve is unlikely to loosen monetary policy hastily.