Opinion: The market is still underestimating the Fed's potential tightening policy

Odaily Planet Daily News T. Rowe Price Chief US Economist Blerina Uruci said the market may still be underestimating the possibility of further tightening by the Federal Reserve. In a report, Uruci stated that since early May, the duration of the Iran conflict has exceeded expectations, oil prices have risen, and U.S. economic growth has remained resilient. While the Fed can ignore temporary energy shocks, sustained pressure from oil and import prices could affect inflation expectations, wage dynamics, and corporate pricing behavior.

Uruci shifted her main view to the federal funds rate remaining unchanged over the next 12 months. She sees a 45% probability of rates holding steady, a 35% probability of a rate hike by the end of the year or early 2027, and a 20% probability of a rate cut. (Jin Shi)