The Federal Reserve held interest rates steady last week, keeping its target range at 3.5% to 3.75%. As a result, markets sold off sharply.
The S&P 500 fell nearly 1.5%, the Dow Jones dropped more than 700 points, and the Nasdaq closed down 1.5%.
Eric Robert, Director of Investments at Stifel’s St. Louis office, told KMOX Radio the Fed’s inflation outlook has gotten murkier.
“Fed Chair Jerome Powell said that the central bank’s forecast is that they’ll be making progress on inflation, but not as much as they have hoped as a result of the conflict in Iran,” he said.
On the wholesale side, the producer price index jumped 0.7% in February, pushing the annual rate of wholesale inflation to 3.4%.
Robert said the ongoing military conflict with Iran is overshadowing everything else.
“Iran is the biggest issue today,” he said. “So you got to keep in mind this February inflation data for the producer price index that follows the consumer prices we already saw, that’s all before the Iran situation kicked off.”
Robert also said much of Fed Chair Jerome Powell’s focus was on what comes next, particularly if oil shipments through the Strait of Hormuz remain disrupted.
“It’s not just the gas prices, of course, diesel fuel has gone up dramatically. But oil is a fundamental input to so many elements of the manufacturing pipeline,” he said. “Higher oil prices do feed inflation over the medium term.”
The Fed is still projecting at least one rate cut before the end of the year, though that depends on how long the situation in the Middle East keeps energy markets on edge.
KMOX Radio submitted this report
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