BlockBeats message, April 4, Huatai Securities believes that the March nonfarm payrolls beating expectations rebound shows resilience in the U.S. labor market, but amid the conflict in the Middle East, the impact of high oil prices on inflation expectations is more critical to the Federal Reserve’s monetary policy.
The Middle East conflict has continued to escalate recently. The oil supply gap driven by the Strait of Hormuz blockade has pushed up oil prices and inflation expectations. Inflation is currently the core variable in the Fed’s monetary policy.
The Fed’s dual mandate for employment and inflation gives it some room to maneuver—avoiding rate hikes to fight inflation—and as inflation expectations heat up, even if the Fed does not raise rates, the Treasury yield curve could move higher, resulting in tightening in a real sense. (Jin10)
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