Fed stuck between war and PPI
Policymakers face a squeeze between an Iran‑war driven oil shock and signs of cooling wholesale inflation, leaving the Fed’s path unclear ( ). Former Fed chair Janet Yellen said one rate cut this year is still possible despite those war‑related inflation risks, even as markets brace for the Fed’s April 28–29 meeting ( ). Meanwhile U.S. equities have pushed back toward record highs, showing investor optimism even with policy uncertainty (morningstar.com).
The Federal Reserve goes into its April 28-29 meeting with two signals pointing in opposite directions: war is pushing energy prices up, while parts of wholesale inflation are cooling. (federalreserve.gov; bls.gov) The Producer Price Index measures what businesses receive for their goods and services before those costs filter through to shoppers. In March, the Bureau of Labor Statistics said final demand prices rose 0.5 percent from February and 4.0 percent from a year earlier, with goods up 1.6 percent and services unchanged. (bls.gov; bls.gov) Energy was the clearest pressure point inside that report. Gasoline jumped 15.7 percent in March, diesel fuel rose 42.0 percent, and crude petroleum climbed 20.2 percent, while core goods excluding food and energy increased 0.2 percent. (bls.gov) That split leaves policymakers deciding whether the oil shock is a short-lived hit or the start of broader inflation. The International Monetary Fund said on April 14 that war in the Middle East is lifting commodity prices, firming inflation expectations, and tightening financial conditions as it cut its 2026 global growth forecast to 3.1 percent. (imf.org) The Fed’s job is to keep inflation in check without crushing growth, and oil shocks make that harder because they can slow demand and raise prices at the same time. The Federal Open Market Committee has held its benchmark rate at 3.50 percent to 3.75 percent since March after keeping it unchanged in January and March. (federalreserve.gov; usatoday.com; finance.yahoo.com) Former Fed chair Janet Yellen said one rate cut this year is still possible even with the war-driven inflation risk. Reuters reported on April 15 that Yellen said the conflict is creating supply shocks that put pressure on inflation, but she still sees a path to one cut in 2026. (msn.com; usatoday.com) Markets are acting as if the Fed can wait. Yahoo Finance reported that investors expect the committee to leave rates unchanged again this month, and Morningstar wrote that United States stocks have climbed back toward record highs even as the war clouds the inflation outlook. (finance.yahoo.com; morningstar.com) The next checkpoint comes on Wednesday, April 29, when the Fed releases its decision at 2 p.m. Eastern and Chair Jerome Powell holds a press conference at 2:30 p.m. By then, officials will have to say whether March’s cooler core readings or April’s oil shock carries more weight. (federalreserve.gov)
