The post Federal Reserve is expected to hike rates due to rising oil prices and inflation risks appeared on BitcoinEthereumNews.com.

The Federal Reserve is now heading toward rate hikes as inflation threatens to rise again. The pressure is coming from rising oil prices, triggered by military conflict in the Middle East. The US bombed three nuclear sites in Iran last Saturday night after Iran responded to earlier Israeli airstrikes. Now Iran is has shut down the Strait of Hormuz, the most critical oil route in the world. According to JP Morgan, if that happens, oil could surge to $130 per barrel, pushing US inflation to 5%. That’s the same level inflation hit in March 2023, when the Fed was hiking rates back-to-back. According to research reviewed by the Fed in 2010, a persistent oil shock leads to weaker consumption and investment, along with a hit to the dollar. In that study, they showed that countries importing oil, like the United States, get poorer as oil prices go up. The loss in national wealth leads to less spending, a weaker exchange rate, and a change in trade balances. People and businesses will try to cut down oil use, but it won’t be enough to avoid damage. The result is a worse oil trade balance and less import of other goods. The non-oil part of the trade balance improves, but only because the economy slows down. Iran warns of retaliation as US and Israel bomb nuclear sites Ten days ago, Israel carried out unprovoked airstrikes on Iranian territory. Tehran hit back. Then, over the weekend, the US joined the fight and dropped bombs on three nuclear facilities in Iran. In response, Iran’s foreign minister said the country “reserves all options to defend its sovereignty.” But since 2000, Iran has threatened over ten times to close off the Strait of Hormuz. If they actually go through with it this time, energy prices will…

---

Filed under: News - @ June 22, 2025 9:22 pm