Iran War Has Exacerbated Fed's 'Worst Nightmare'

Oil and jobs are pulling the Federal Reserve in opposite directions, and a war in Iran just tightened the vise. At its meeting on Wednesday, the Fed faces a familiar dilemma: Inflation remains stubborn, while hiring has cooled. The conflict in Iran adds a new layer of uncertainty, with Goldman Sachs analysts warning it could simultaneously raise the odds that weaker labor conditions will require rate cuts later, as well as drive up oil prices that will keep inflation elevated, delaying those cuts, reports Semafor. A Thursday note from Wells Fargo economists called the high inflation-weak jobs scenario the Fed's "worst nightmare," per USA Today.

Economists widely expect the central bank to keep interest rates steady for now. That stance is likely to collide with pressure from President Trump, who has urged an emergency rate cut "right now" and blasted Fed Chair Jerome Powell on Truth Social, questioning why Powell can't be subjected to a congressional subpoena. Citing forecasts from CME FedWatch, CBS News notes that there's a 99% chance that the Fed will keep its benchmark rate between 3.5% and 3.75% at Wednesday's gathering; for the April 30 meeting, that figure drops slightly to 95%, while it falls to 77% for the June meeting.