Former Powell Advisor: Middle East Situation Is the Fed’s “Key Variable”

According to Jinse Finance, the situation in the Middle East is becoming a "major variable" for the Federal Reserve. Jon Faust, a fellow at the Center for Financial Economics at Johns Hopkins University and former senior advisor to Fed Chair Jerome Powell, stated that the Iran conflict "could lead to a surge in oil prices, a collapse in market confidence, and even trigger a recession," though its ultimate impact remains difficult to predict. In an interview, he noted, "Recessions often begin with some kind of shock—right now, the Middle East may be brewing such a crisis, and the probability is slightly higher than before." The Federal Reserve will hold its policy meeting from Tuesday to Wednesday this week, and the market generally expects it to keep the benchmark interest rate in the 4.25%-4.5% range for the fourth consecutive time. Faust believes the core uncertainty of this week's meeting lies in whether Powell will send a clearer signal: is the risk of an inflation rebound greater, or is a weakening job market more concerning? "This will reveal the Fed's policy direction for the second half of the year." He added that, for now, the Fed has not shown a clear preference for either side.