Fed's Waller Says He Was Ready To Dissent For Rate Cut Until Oil Shock Made Inflation 'More Of A Concern'

Group 1: Federal Reserve Actions and Perspectives - Federal Reserve Governor Christopher Waller initially planned to dissent against the decision to hold rates steady due to February's jobs report showing 92,000 payroll losses, but changed his mind due to the closure of the Strait of Hormuz and rising crude prices [1] - The Federal Open Market Committee (FOMC) voted 11-1 to maintain the federal funds rate at 3.5%-3.75%, with updated projections indicating inflation is expected to reach 2.7% by year-end, up from 2.4% in December [4] - Waller indicated that if the labor market remains weak, he may advocate for cutting the policy rate later in the year, depending on the trajectory of oil prices [7] Group 2: Oil Market Dynamics - Brent crude prices rose to around $107, representing a 55% increase from pre-war levels of approximately $68, significantly impacting inflation expectations [2] - Waller emphasized that the current oil shock is not temporary and will have a persistent impact on inflation, contrasting it with previous supply chain disruptions [3] - The potential for energy infrastructure damage during the war could prolong the normalization of oil prices even after a ceasefire [6] Group 3: Market Predictions and Sentiment - Prediction markets have adjusted their expectations for Fed rate cuts, with the likelihood of zero cuts rising from 9% to 31% since the onset of the war, indicating a shift in trader sentiment [5] - The Polymarket's US-Iran ceasefire contract suggests a 54% chance of a deal by June 30 and a 71% chance by December 31, reflecting market speculation on geopolitical developments [5]