U.S. Monetary Policy and Inflation

Attacks tied to the Iran war have effectively choked Strait of Hormuz traffic, sharply lifting oil and gas prices and sending longer-term interest rates higher since the Feb. 28 outbreak. That energy-driven inflation spike has all but erased market expectations for Fed cuts this year — CME FedWatch shows no cuts priced and about a 25% chance of a hike by October — and Fed officials warn higher inflation or drifting expectations could put rate increases back on the table.