Fidelity International Analyst: U.S. Interest Rates Dependent on Middle East Conflict Duration

Fidelity International's senior global macro strategist, Max Stainton, stated in a report on April 30 that the outlook for U.S. interest rates for the remainder of the year will increasingly depend on the duration of the Middle East conflict. According to Jin10, Fidelity's baseline scenario remains slightly more dovish than market pricing, anticipating that the incoming Federal Reserve Chair, Kevin Warsh, and the committee will generally aim to mitigate the impact of energy shocks on economic growth. However, with the rising risk of a prolonged closure of the Strait of Hormuz, the potential for energy price shocks to spread into broader inflationary pressures affecting the overall economy is becoming evident. "We still expect one rate cut this year, but the risks are clearly tilted towards no action being taken throughout the year," Stainton noted.