Unhedged The Fed’s juggling act
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Mar 19, 2026 They unpack how rising oil from the war could feed inflation and complicate central bank decisions. They debate whether energy shocks should be looked through or fought and why oil is uniquely tricky for policymakers. They explore bond market repricing, shifting rate-cut expectations and why Europe and parts of Asia may feel the pain more.
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Energy Shock Can Spill Into Core Inflation
- Energy-driven inflation is different because central banks cannot 'print' oil to counter it.
- Jay Powell warned this shock may 'leak' into core inflation and inflation expectations, forcing policy action if it does.
Core Inflation Momentum Remains Uncomfortably Strong
- Underlying inflation outside energy is not falling fast enough to reassure central bankers.
- Powell highlighted the need for progress on goods inflation and noted services inflation ex-housing is still stubbornly high.
Bank Of England Shift Sparks Gilt Yield Spike
- The Bank of England removed guidance expecting rate cuts and kept policy at 3.75%, surprising markets.
- Short-dated gilt yields spiked, implying markets now price potential rate rises instead of cuts.