Energy shock changes inflation narrative as Walsh faces new challenges in managing hawkish expectations

Now, the new chairman of the Federal Reserve faces a completely different situation: while other policymakers are warning about the resurgence of inflation, he must figure out how to curb the sudden rise in interest rate hike expectations. Observers of the Federal Reserve say that the energy shock triggered by the Iran conflict has already closed the door to rate cuts. This means that for Walsh, simply maintaining the current interest rate level may already count as a victory. Stephanie Roth, chief economist at Wolfe Research, said: “There is absolutely no appetite for rate cuts. Walsh must find a way to get the market to eliminate the priced-in rate hike expectations — this is his biggest challenge this year.” (Bloomberg)