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The Middle East is engulfed in war, and the possibility of the U.S. getting involved in the conflict is increasing. Will the Federal Reserve be intimidated or continue to hold firm?
1. Bank of New York Mellon: Monetary policy is not suitable for addressing geopolitical shocks, but the tensions in the Middle East do mean that the Federal Reserve will become more cautious.
2. Saxo Bank: The Israel-Palestine conflict may push oil prices higher, re-accelerating inflation, which could hinder the Federal Reserve from lowering interest rates as expected, thereby prolonging market volatility.
3. Dutch Bank: The Federal Reserve may use the rise in oil prices due to the Israel-Palestine conflict as a reason to resist calls for interest rate cuts from Trump, but this will not provide much support for the dollar.
4. Former Powell Advisor: The situation in the Middle East is becoming a 'major variable' for the Federal Reserve. The Israel-Palestine conflict could lead to soaring oil prices, a collapse in market confidence, and even trigger a recession, with the ultimate impact still hard to predict.
5. IG Group: The risk before this week's Federal Reserve meeting is that the situation in the Middle East could become a catalyst for the Federal Reserve to adopt a more dovish stance this week, similar to the impact on the Federal Reserve after the Hamas attack on October 7, 2023.
6. Bank of America: If rising oil prices reverse the inflation trend, it could lead to a more stagflation-like scenario. However, current oil prices are still below levels from a year ago, so we need to continue monitoring the situation; it's too early to draw conclusions now.
7. Citigroup: If the situation in the Middle East worsens and oil prices continue to rise, it will exacerbate the inflation challenges already faced by the Federal Reserve. Previously, Federal Reserve officials have emphasized that they are not in a hurry to cut rates; if inflation risks increase, the Federal Reserve will only lower rates at the end of the year.
8. Oxford Economics: The rise in oil prices resulting from the Israel-Palestine conflict may make the Federal Reserve more dovish, as the economy has already softened, and the threat from sustained oil price surges to growth and employment may be greater than the threat to inflation itself, potentially prompting the Federal Reserve to cut rates earlier.
