Rising US inflation and a closed Strait of Hormuz may force the Fed to delay rate cuts, supporting the Dollar amid hawkish risks.
Incoming Fed Chair Kevin Warsh confronts mounting inflation pressures as US price growth accelerates and energy costs rise. Persistent inflation, exacerbated by geopolitical tensions in the Strait of Hormuz, could limit the Fed’s ability to ease policy in the near term.
Recent inflation data has heightened concerns among FOMC members, some of whom have already flagged inflationary risks. If energy prices remain elevated or inflation expectations rise, Warsh may struggle to justify rate cuts, particularly as markets reassess Fed policy risks.
The Dollar remains supported as investors price in a more hawkish Fed stance, reducing expectations for imminent monetary easing.