"Fed whispering tube": Ceasefire agreement makes it harder for the Fed to decide

"Fed Whisperer" Nick Timiraos wrote that the ceasefire between the US and Iran provides an opportunity to resolve the serious threat to the global economy. But for the Fed, this may just be exchanging one problem for another: the volatility of energy prices could keep inflation at high levels, but not to the point of harming demand, leading to a situation where interest rates remain unchanged for longer. The minutes of the Fed's March meeting emphasized that this war is not the main reason the Fed is reluctant to cut rates, but rather it has made the Fed's already cautious stance even more complex. Even before the conflict, the path to rate cuts had become narrow. The labor market has stabilized, easing concerns about economic recession, while progress in achieving the Fed's 2% inflation target has stalled. The Fed did not adjust rates at the March meeting, partly due to concerns about the risks of the war prolonging. Escalation of the conflict could drag down economic growth and lead to a recession, which was the last and most powerful reason supporting a restart of rate cuts. However, paradoxically, the end of the war in the short term may actually make it more difficult rather than easier for the Fed to implement loose policies. This is because the ceasefire agreement eliminates the worst economic scenario, where severe price hikes disrupt supply chains and harm demand, which can be said to be more important than eliminating the risk of new inflation pressures.