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The Federal Reserve has dropped its bias toward interest rate cuts as Kevin Warsh assumes leadership of the central bank, with Donald Trump's military conflict against Iran identified as the force driving inflation to nearly double the Fed's target.
The policy shift places Warsh at the helm of an institution whose primary inflation variable originates not on trading desks but in a war zone — a constraint that rate decisions alone cannot resolve.
War in Iran, Prices at Home The Trump administration's armed campaign against Iran has delivered an inflationary shock that moves through the physical economy before it appears in any price index.
Conflict disrupts supply; what gets taken offline does not come back cheaply or quickly. Rate increases can suppress demand, but they cannot restore production or move goods.
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