Overview
- Markets, which had seen about a one-in-four chance of a Fed hike before Monday, cut that to near 5% after Jerome Powell told a Harvard audience the Fed can wait and see how the oil shock plays out.
- Powell said supply shocks often fade before rate moves take effect, so tightening now could slow the economy without fixing energy-driven price spikes.
- New York Fed President John Williams later said higher energy costs are likely to raise headline prices for now, not core inflation, reinforcing a data-dependent pause.
- WTI crude hovered near $105 a barrel and U.S. gasoline averaged about $4, while a jump in borrowing costs, wider credit spreads, and falling stocks tightened financial conditions on their own.
- Goldman Sachs called earlier hike bets an overreaction and still projects rate cuts late this year, while UBS said a long disruption could push major central banks in different directions, raising currency and bond volatility.