Bank of America Predicts Fed's Response to Oil Price Surge

Bank of America has indicated that the Federal Reserve may face another supply shock due to rising oil prices. According to Jin10, the bank's report suggests that the Summary of Economic Projections (SEP), released before the March Fed meeting, might see an upward revision in both overall and core inflation forecasts. The report notes that if long-term growth expectations are also adjusted upwards, the median dot plot for long-term interest rates could slightly increase. In this scenario, the bank believes Federal Reserve Chairman Jerome Powell might acknowledge the risk of stagflation while emphasizing a cautious approach.