Commerzbank economist Bernd Weidensteiner notes that the Federal Reserve sees itself in a good position despite Iran‑related inflation risks, with officials expecting only a small core inflation impact. However, sharply higher gasoline prices are pushing headline inflation up, and the Fed is wary of unanchored expectations, so Commerzbank does not expect rate cuts to resume until toward the end of 2026.

Fed cautious on cuts after oil spike

"Despite the potential impact of the war in Iran on inflation, the Fed considers itself to be in a “good position.” Several Fed members have pointed this out, including Philipp Jefferson (Vice Chair of the Federal Reserve Board) and John Williams (President of the New York Fed). Of course, uncertainty has risen, but Williams does not expect any major changes in underlying inflation."

"In the short term, sharply rising energy prices—gasoline prices have risen by a third in the past month—are causing the inflation rate to spike."

"From the Fed’s perspective, however, the seemingly endless succession of such one-off effects increases the risk that inflation expectations will break free from their likely already loosened anchors. The Fed will certainly want to prevent this."

"Even with a sustained ceasefire in the Persian Gulf, a rapid resumption of interest rate cuts is therefore unlikely. We do not expect the next move until toward the end of the year."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)