As the Iran war enters its fourth week, the global financial community is reassessing the trajectory of the US dollar's benchmark interest rate. An economist survey report released by Reuters on Thursday reveals a complex outlook: despite a 40% surge in oil prices and a sharp rise in two-year US Treasury yields, economists have not entirely abandoned hopes for a rate cut like traders have. The survey suggests that September is seen as the most likely window for a policy shift, provided that the spillover effects of the energy crisis remain within controlled limits.
Macroeconomic Challenges
The current inflation rate is about one percentage point above the Federal Reserve's 2% target. The experts interviewed believe that while the energy shock is severe, its duration might be shorter than the structural crisis of the 1970s. However, this optimism faces real challenges, especially as Trump's nomination of Walsh has sparked market speculation about the Federal Reserve's independence and future communication strategies. Jan Groen believes that inflation concerns triggered by geopolitical tensions are the greatest obstacle to reaching a consensus on rate cuts.
Investment Impact
For global investors, the expectation that the Federal Reserve will "hold steady" until September means that asset allocation needs to be readjusted. Currently, more than two-thirds of respondents believe there will be no rate cuts before September, which consolidates the dollar's appeal as a safe-haven asset. The divergence in interest rate level forecasts for the end of 2026 also reflects experts' uncertainty about the pace of post-war economic recovery. If the PCE growth rate for the three quarters starting in April remains around 3% as expected, the Federal Reserve's only rate cut this year will face significant political and data-related resistance.
