Fed's Barr: Iran oil price shock could shift inflation expectations and delay rate cuts

Haresh Menghani FXStreet

Federal Reserve (Fed) Governor Michael Barr said on Thursday that the economy has remained resilient through a series of shocks, but those have complicated the central bank reaching its 2% inflation goal.

Additional Quotes:

If the Middle East conflict ends soon, its economic impact could be limited, but there could be broad implications for the economy otherwise.
Concerned that another price shock could shift inflation expectations, leading to more inflation persistence.
Makes sense for the Fed to take some time and assess economic development before further policy changes.
Recent regulatory changes and cuts to staff are eroding trust in the stability of the financial system, making banks less resilient.
Job and labor force growth appear to be in balance, but a low level of hiring leaves the labor market vulnerable to shocks.
The longer inflation remains above 2%, the greater the risk that it becomes entrenched.

Market Reaction:

The comments remain supportive of the bid tone surrounding the US Dollar (USD), which continues to be underpinned by persistent geopolitical uncertainties stemming from the Middle East conflict.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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