Analysis: The Federal Reserve Faces Challenges, Rising Oil Prices May Disrupt Expectations of U.S. Inflation Decline

Odaily According to reports, nearly a month has passed since the outbreak of the US-Israel-Iran conflict. Shipping through the Strait of Hormuz remains obstructed, disrupting the global energy supply system and causing international oil prices to soar. Firstly, global inflation faces a comprehensive rebound, as rising oil prices transmit through the entire industrial chain. Costs across all sectors, including energy, food, transportation, and chemicals, will surge sharply. Economies highly dependent on energy imports, such as Europe, Japan, and India, will face more severe pressure. The United States is a net energy exporter, but inflation stickiness may become permanently entrenched, and the Federal Reserve's monetary policy will also face a dilemma. Currently, the average gasoline price in the U.S. has surged over 30% within three weeks. High oil prices directly reverse the previous trend of declining inflation and will completely overturn market expectations for interest rate cuts.

Maintaining a high-interest-rate environment for longer will directly suppress the U.S. real estate market, corporate financing, and stock market valuations. Especially since this is a U.S. midterm election year, and gasoline prices are one of the most sensitive livelihood indicators for American voters. For global economic growth, a slowdown is likely. High oil prices directly erode households' disposable income, squeeze non-energy consumption, and simultaneously raise production costs for businesses. (Jin10)