The Fed's Iran Problem ...

The Fed’s Iran problem ...
The war driven surge in oil prices has rippled through the global economy, battering Wall Street, house hunters, farmers and more.

“The largest supply disruption in the history of the global oil market,” per the International Energy Agency, could also complicate matters for the Fed. Some economists and traders have lowered their expectations for rate cuts this year even as President Trump has urged immediate action.

That could put Kevin Warsh, Trump’s pick for Fed chair whom the president expects will push for lower borrowing costs, in a bind.

Brent crude, the global oil benchmark, traded at $98.99 a barrel this morning, after closing at a multiyear high yesterday. Its price has surged more than 35 percent since the U.S.-Israeli attacks on Iran began, despite efforts by the Trump administration to cap energy prices, including by easing sanctions on Russia and its oil.

Jitters in the oil market remain high: Iran has begun laying mines in the Strait of Hormuz, the waterway through which 20 percent of the world’s oil exports flow. Mojtaba Khamenei, Iran’s new supreme leader, has pledged to keep the strait virtually shut.

“A higher inflation path will make it harder for the Fed to cut soon,” David Mericle, the chief U.S. economist at Goldman Sachs, wrote to investors yesterday. Goldman now expects the central bank’s first rate cut of the year to come in September instead of June, citing the war and inflation. (June would be Warsh’s first meeting as Fed chair if confirmed by the Senate.)

Futures traders today give a 41 percent chance of any rate cut this year, and certainly not before December. Before the war began, they were betting on two cuts.

Warsh’s Senate confirmation hearing could be feisty. (No date has been set yet.) Trump’s nominee criticized a Fed rate cut in September 2024, but has appeared more supportive of lowering borrowing costs since Trump took office last year.

Meanwhile, Trump continues to demand action, and fast. Yesterday he chided Jay Powell, the current chair, for not “dropping Interest Rates, IMMEDIATELY.”

But the risk of war-driven inflation probably opens Warsh’s position on rates to tough scrutiny from lawmakers.

Next week’s Fed meeting may offer big clues on what’s next. Officials will release their quarterly forecast on rate cuts. 

Credit for this post : Andrew Ross Sorkin The New York Times Deal Book March 13th 2026. Photo from our Adobe Stock library.