Institutional Analysis: Middle East conflict will change the US inflation trajectory, Federal Reserve will remain on hold

Golden Ten Data reported on March 11 that Brian Jacobsen, Chief Economist at Annex Wealth Management, stated: The February inflation data was originally moving in the right direction, but the emergence of the Middle East conflict changed this trajectory. Energy could have contributed to deflation, but now it will instead bring inflation. Due to chaos in the fertilizer market, food prices may also begin to show signs of accelerating inflation. The food and energy components in the CPI account for 20% of the consumer basket, but they play a role in shaping consumer perceptions of inflation that goes beyond their actual size. The Federal Reserve is likely to emphasize maintaining unchanged interest rates and remain vigilant about inflation, but monetary policy cannot reopen the Strait of Hormuz, so these tough statements are likely to be just rhetoric. The Federal Reserve will actually not take action. If it does take action, it may repeat the mistake made by European Central Bank President Trichet in 2011, when he panicked and raised interest rates due to rising commodity prices, which ended up exacerbating the economic recession in the eurozone.