Why the New Fed Chair Faced Immediate Pressure Upon Taking Office [Weekend Money]

Inflation Emergency Triggered by Middle East War
Energy Prices Surge 17.9% Year-on-Year
Stalemate in Ceasefire Talks Raises Concerns Over Prolonged High Oil Prices
Market Expectations for Rate Cuts Diminish

Following last year's tariff shock, the surge in energy prices caused by the Iran war is now driving inflation in the United States. As a result, the policy burden on Kevin Wash, who will officially assume office as Federal Reserve (Fed) Chair, is expected to grow.

Kevin Wash, Federal Reserve (Fed) Chair. Yonhap News

According to iM Securities, the U.S. consumer price index (CPI) inflation rate reached 3.8% year-on-year last month, marking the highest level since May 2023. Notably, core CPI inflation, which excludes highly volatile items, also rose by 0.4% compared to the previous month, the highest increase since January 2025.

The main driver behind this inflationary spike has been the energy sector. Energy prices soared by 3.8% month-on-month and by 17.9% year-on-year. The energy sector's contribution to the overall inflation rate (3.8%) was 1.1 percentage points, up from 0.8 percentage points in March.

If the current high oil prices do not subside, energy-induced inflationary pressure is expected to persist for some time. In particular, with the possibility of additional limited strikes by U.S. President Donald Trump also being raised, there remains the potential for further increases in oil prices. This has led to doubts as to whether inflationary pressure in the U.S. will peak within the first half of the year.

Inflationary pressure is likely to pose a significant challenge for Federal Reserve Chair Kevin Wash as well. Within the Fed, opinions are already divided regarding rate policy, and inflationary pressures stemming from the war are expected to be a major obstacle to policy management.

Considering that temporary instability has occurred in financial markets during the inauguration periods of new Fed chairs in the past, the combination of energy price pressure and new chair risk may further heighten financial market volatility, including a rise in Treasury yields.

Park Sanghyun, a researcher at iM Securities, said, "In order to pass the peak of U.S. inflationary pressure and foster expectations for a rate cut, a ceasefire agreement and the subsequent reopening of the Strait of Hormuz must come first."

This content was produced with the assistance of AI translation services.