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2026-09-21 19:32:10
[Supply Shocks Fuel Inflation, Potential Window for Bond Market] ⑴ Demand for jet fuel, heating oil, and diesel continues to weaken. ⑵ Geopolitical risks remain uncertain; a significant escalation in the Middle East could push up oil prices, triggering a short-term sell-off of US Treasuries. However, such inflationary shocks could create buying opportunities in bonds. ⑶ The Federal Reserve recently completed its interest rate hike, raising its economic growth forecast while lowering its unemployment rate estimate. High oil prices and a tight financial environment will suppress consumption and corporate profits, creating a demand-damaging effect that benefits the bond market. ⑷ Several Federal Reserve officials have stated that inflation caused by supply shocks is likely to be persistent. Excluding energy and food, inflation in the service sector remains high, and the central bank still retains room to tighten policy.
