Dallas Fed Says Iran War Could Push Inflation Over 4%
Dallas Fed research suggests the Iran War could lift inflation past 4% this year. However, long-term inflation expectations are likely to remain stable.
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An extended disruption of the global energy trade resulting from a conflict with Iran could drive headline inflation in the United States to well over 4% by the end of the year. According to fresh research from the Federal Reserve Bank of Dallas, while short-term spikes are possible, the impact on long-term inflation expectations is projected to remain modest. This working paper suggests that U.S. central bankers, who monitor these expectations closely, may find comfort in the relative stability of consumer outlooks despite potential volatility in energy markets.
There is little evidence of higher gasoline prices being passed through to core inflation or long-run inflation expectations becoming unanchored.
