The Middle East conflict will dominate the path of U.S. interest rates, with a risk bias against rate cuts
According to Jinshi News, Max Stainton, Senior Global Macro Strategist at Fidelity International, stated in a report that the outlook for U.S. interest rates for the remainder of the year will increasingly depend on the duration of the Middle East conflict. Fidelity's baseline scenario remains slightly more dovish than market pricing, expecting that the incoming Federal Reserve Chairman Waller and the committee will generally lean towards mitigating the damage caused by energy shocks to economic growth. However, as the risk of a prolonged closure of the Strait of Hormuz increases, the risk of energy price shocks spreading to broader inflation shocks and affecting the overall economy has become clearly visible. "We still expect a rate cut this year, but the risks are clearly skewed towards no action being taken throughout the year."
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