The Impact of FED Policy Uncertainty and Geopolitical Tensions on Global Markets

This week's key market themes are focused squarely on the FED's interest rate policy, Iran's attacks on Israel, and the potential for Israeli retaliation. Reports confirm that Israel has launched a retaliatory attack on Iranian territories, while macroeconomic data from the US has emphasized persistent inflation concerns, which have dampened market risk appetite.

FED officials' comments have also been influential, as expected.   Let's not forget that FED Chair Jerome Powell hinted at a shift in rhetoric following a surprising increase in inflation indicators midweek, suggesting that rate cuts might be delayed for longer than previously anticipated.

Last night, we monitored the statements of certain FED officials. Atlanta FED President Raphael Bostic stated that there might not be a rate cut by the end of the year, acknowledging that while inflation is moving toward the 2% target, the descent process might be slower than expected. New York FED President John Williams made clear that, given the strength of the economy, there is no urgency to lower interest rates. While Williams acknowledged that rates will eventually be cut at some point, he made it clear that the timing will depend on the economy. Market expectations include one or two rate cuts this year, while FED officials had previously projected three rate cuts for this year in their last month's projections.