Economists indicate that Israel’s attacks on Iran’s nuclear facilities may delay the Federal Reserve’s interest rate cut schedule as the U.S. central bank waits to assess any potential impact on inflation. Oil prices skyrocketed to a multi-month high on Friday following the attack, as investors accounted for the risk of significant disruption to global markets. RSM US LLP Chief Economist Joseph Brusuelas stated that this could exacerbate inflationary pressures already building due to U.S. President Donald Trump’s tariffs on American trading partners, making it unlikely that the Federal Reserve will take any significant actions in the short term.
Brusuelas noted: “I believe this could lead the Federal Reserve to remain on hold at least until the December meeting, until they have a full understanding of domestic inflation dynamics.”
Economists Anna Wong and Eliza Winger predicted in a report on Friday that if oil prices rise further to $100 per barrel, it would lead to a 17% increase in all grades of RBOB Gasoline prices in the U.S., equivalent to a rise from $3.25 per gallon to $4.20. They stated this would push the year-on-year increase in June CPI to 3.2%.
The Federal Reserve will hold a meeting on June 17-18 to decide on interest rate policy, with the market widely expecting the Federal Reserve to maintain the benchmark interest rate. JPMorgan Chief U.S. Economist Michael Feroli downplayed the likelihood of the Federal Reserve mentioning the current situation in the post-meeting statement in a report released on Friday.
He said: “As of now, we question whether the Middle East issue is worth mentioning.”
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