Fed officials signaled on Wednesday they may need to raise rates soon rather
than cut, a sharp pivot amid rapidly rising inflation. Evercore ISI analyst
Krishnan Guha said falling energy prices could ease inflation in coming months,
but warned the rate outlook has decoupled from oil and the key uncertainty is
whether underlying inflation will cool enough to avert eventual hikes. Guha
flagged two additional upward pressures beyond energy: ongoing tariff
pass-through and cost spillovers from a surge in AI infrastructure investment.
Claudia Sahm, chief economist at New Century Advisors and a former Fed
economist, said she does not yet see the usual triggers that would prompt a Fed
response to supply-driven inflation — an overheated labor market or unanchored
inflation expectations — but conceded the case for action is accumulating and
that the Fed should be prepared to raise rates if conditions worsen. She added
the Fed could move faster than it did during the pandemic inflation spike
because the debate is already underway.
