Analysis: Energy Prices Become Key Variable in Fed Policy Path

BlockBeats News, April 29th, Strategy Asset Managers CEO Thomas Hulick stated that with the market widely expecting Federal Reserve Chair Powell and the Federal Open Market Committee to maintain interest rates, the current key variable is energy. The futures market indicates an expectation of oil prices above $85, which continues to push up inflation expectations and exacerbate intraday fluctuations in U.S. Treasury yields. As long as the unresolved Middle East tensions involving Iran and the potential blockade of the Strait of Hormuz persist, the bond market will remain sensitive to inflation risks.

“That is why we are still hearing discussions about a possible rate hike later this year.” He added that to bring yields back to normal, oil prices may need to fall back to the $70 per barrel range. “Once energy prices stabilize, inflation expectations should decrease, thereby bringing U.S. Treasury yields back to a more fundamental level.” (Jinse)