Overview
- St. Louis Fed’s Alberto Musalem and Chicago Fed’s Austan Goolsbee, who spoke Wednesday, said inflation now poses the bigger risk and that rates may need to stay on hold for some time.
- Goolsbee warned the U.S.-Iran war is creating an inflationary shock that could unmoor price expectations if oil stays high.
- The Fed’s preferred gauge showed March inflation running hot, with headline PCE at 3.5% and core at 3.2% against a 2% target.
- Crude prices have swung back above $100 a barrel, while a New York Fed index points to the worst global supply chain strain since July 2022.
- Cleveland Fed’s Beth Hammack urged policy patience given high uncertainty, and investors now expect few chances of rate cuts before 2027 with the policy rate still at 3.50% to 3.75%.