Summary

• The macro outlook may still be precarious, but the Federal Reserve is expected to leave its target rate unchanged at tomorrow’s policy announcement.
• The Warsh era begins during an unsettled period for central banks. Several of the Fed’s counterparts have started raising interest rates, citing inflation as the catalyst.
• The Fed, by contrast, is expected to maintain its wait-and-see strategy, effectively betting that the recent run-up in US inflation will be temporary and begin to recede.
• By leaving interest rates unchanged at tomorrow’s policy meeting, the Fed is essentially signaling that the Iran conflict is over, energy prices will continue to ease, and the inflationary threat has ended.

The newly minted US-Iran ceasefire is only a day old, but markets reacted positively. Oil prices and Treasury yields fell, and stock prices surged in Monday’s trading. It’s encouraging early vote of confidence, although the economic effects of the war