The Higher Standard The Fed Held Rates, But Will War With Iran Trigger a Recession?
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Jun 22, 2025 The Federal Reserve's decision to hold interest rates sparks an exploration of past wartime recessions and economic predictions. The discussion highlights how geopolitical tensions, like those involving Iran, could signal upcoming challenges. With inflation and employment metrics lagging, the hosts humorously contrast military actions with market behaviors. Insights into the Fed's communication strategies reveal a complex interplay between economics and foreign policy. Listeners are left questioning the impact of conflict on consumer confidence and economic stability.
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Fed's Forward Guidance Uncertainty
- The Fed's forward guidance has become a PR game and less of a reliable economic compass.
- Uncertainty in geopolitical conflicts forces companies and the Fed to be cautious in their forecasts.
Shelter Inflation Lags Economy
- Shelter inflation remains a major driver of overall inflation despite seeming cooling in housing markets.
- Shelter costs are lagging indicators and continue to elevate inflation beyond the Fed's 2% target.
War Causes Economic Downturns
- Wars typically trigger negative economic consequences like oil shocks, inflation, and recessions.
- The 1990 Gulf War sharply increased oil prices and drove the U.S. into a recession due to war-related uncertainty.