Dhingra, previously known for her dovish stance on the Monetary Policy Committee, noted that the energy shock serves as the primary obstacle to predictable monetary policy. While she advocated for a quarter-point rate cut in February, the subsequent closure of the Strait of Hormuz has forced a pivot in her calculus. The bank’s April meeting minutes confirm that while rapid resolution of the conflict could still justify rate cuts, a deepening crisis may necessitate further tightening to combat persistent inflationary pressure.

Market participants are recalibrating their expectations accordingly. Traders have largely dismissed the prospect of an immediate rate hike this month but are currently pricing in an 80% probability of a quarter-point increase by September. This volatility mirrors concerns expressed by U.S. officials, including Kansas City Fed President Jeffrey Schmid, who recently warned that the current price spike may prove far more durable than initial forecasts suggested. As energy costs continue to dictate the inflation narrative, central bankers face the increasingly difficult task of setting rates in an environment where the global oil supply remains hostage to geopolitical volatility.