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Chapter 1: What decisions did the Federal Reserve make regarding interest rates?
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Chapter 2: How is the war in Iran impacting inflation and household bills?
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Chapter 3: What does the latest inflation data indicate about the economy?
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Chapter 4: What insights do experts provide on the Fed's uncertainty?
The folks in there are watching. Show! Show! Welcome to Property Markets. I'm Ed Elson. It is March 19th. Let's check in on yesterday's market vitals. The major indices fell as the Federal Reserve announced its interest rate decision. More on that in a moment. Treasury yields climbed.
Chapter 5: How could oil prices affect the overall economic outlook?
Meanwhile, Brent crude prices jumped after an airstrike on Iran hit one of the world's biggest gas fields. Okay, what else is happening? The Federal Reserve has decided to hold rates steady. That outcome was widely expected. Kalshi put the odds of a hold at 99%. In its statement, the Fed noted that the economic implications of war with Iran were, quote, uncertain.
Meanwhile, recent inflation data has been discouraging. The producer price index rose 3.4% year over year. That was its biggest annual gain in a year. And core PPI, which excludes food and energy, came in at 3.9%.
Chapter 6: What are the potential implications of stagflation?
Personal consumption expenditures told a similar story last week. Core inflation rose 0.4% in January alone and 3.1% year over year. And remember, these reports only offer a rearview mirror. What is ahead is looking even worse, at least for now. Since the US struck Iran on February 28th, the price of oil is up 40% and gas prices have risen more than 30%.
As price increases are also hitting other industries such as agriculture, where the cost of fertilizer has risen 25%. So the bottom line is, our bills are probably going to go up even more. Here to discuss the inflation outlook for 2026, we're joined by another panel of experts today.
We have Michael Gapin, Chief US Economist at Morgan Stanley, and also Robert Armstrong, Financial Commentator for the Financial Times and author of the Unhedged newsletter.
Chapter 7: How do geopolitical events influence economic predictions?
Michael, Robert, Thank you both very much for joining us. Michael, I'm going to start with you. We got the Fed decision. Rates remain where they are. Everyone expected that. Was there anything else we found out? Anything that is perhaps unusual, interesting, or maybe changes the situation in any way?
I wouldn't say that there was anything unusual because the standard playbook for the Federal Reserve in a situation of getting an oil price shock is to be predisposed to want to look through any increase in headline inflation. So I think what I heard a lot of, though, and you noted it,
Chapter 8: What is the current health of the U.S. economy according to experts?
The repetition of uncertainty, uncertainty, uncertainty. Writing down a forecast at this point in time, very difficult. Powell said, take our forecast with a grain of salt. And he said, this is one of those moments where probably not submitting a forecast would have been easier than submitting one.
And so I think, yes, the Fed is saying, okay, headline inflation will be rising, but that's only part of the story. This is another supply shock. that puts upward pressure on both inflation and the unemployment rate. So that leaves our goals in tension. So to know what to do, we probably need to see some more data.
And so I think he gave what a balanced view of the outlook, could be higher inflation, could be weaker labor markets, and then interjected a little uncertainty and caution. And I think that's the appropriate response. So I wouldn't say a lot new,
But just the re-emphasis on uncertainty tells you again, the Fed would like to see progress on inflation, but now there's kind of another hurdle that it has to overcome this year. What about looking forward in terms of rate cuts, Robert? What did we learn, if anything, about what we're going to see in 2026 from the Fed?
I mean, if you look at the notorious dot plot, and I do want to take on board Michael's comment that this is the chair Powell and the fed was obviously not very pleased at having to have give to, to give projections this time around, given that we've rolled the iron dice and there's so much war on certainty that,
But if you do look at that dot plot, which shows the projections for appropriate rate policy this year, there was kind of a bit of compression. Now, nobody is looking for rates to be increased again this year, but the tail of people who think there should be several cuts pushed up as well. So the plot for 2026 kind of compressed. And partly that's an expression of uncertainty.
And partly it's saying we are stuck here with these, what Powell describes as modestly restrictive rates. And we're stuck between the two ends of our mandate. And what are we going to do? We're going to sit and wait until something happens. And I don't know what else in their position. I don't know that there's anything smarter to do than that.
Well, I think for consumers and for observers, I mean, my intro there basically said it, which is inflation appears to be set to rise. And that's what we're all worried about. And so I guess the question is, or something that I was expecting was for them to say, yeah, this is something we're quite worried about too.
And it sounds like what we heard was we don't really want to say anything about it. We're going to acknowledge the elephant in the room, which is that Iran is happening and that that's going to have an effect on oil prices. It's going to have an effect on gas prices. In fact, we're already seeing it.
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