Asset managers signal rising inflation risks from energy disruptions could delay or reverse Fed easing plans this year.
Pimco’s chief investment officer said Federal Reserve rate cuts would be counterproductive amid inflation pressures from the Iran conflict’s impact on oil markets. The firm did not rule out potential rate hikes for the U.S. as energy prices drive inflation higher.
The Fed’s preferred inflation gauge, the PCE index, hit 3.5% in March, the highest in nearly three years. The central bank held rates steady last month but faced the most internal dissents since 1992, signaling division over the policy path.
Two-year Treasury yields surged 0.5 percentage points since late February to 3.87%, reflecting markets pricing in a more hawkish Fed trajectory. Franklin Templeton echoed concerns, noting investor demand for inflation-protected assets is rising.