KPMG: The Federal Reserve is expected to be forced to raise interest rates in the second half of the year

BlockBeats message, April 3, the risk of global stagflation amid the Iran war has intensified. Diane Swonk, Chief Economist at KPMG, said that once a stagflation scenario takes hold, a “deep recession” may be the only way out. Stagflation is a worrying economic situation characterized by persistently high inflation and weak economic growth.

Swonk said: “A blockade of the Strait of Hormuz and the resulting surge in oil prices—its impact has long gone beyond a simple oil shock.” She believes the shock created by the current situation is more severe than that of any past oil crisis. This directly raises all kinds of costs, which in turn drives up consumer prices, while companies’ willingness to hire drops sharply, leaving the job market under strain. With multiple factors intertwined, stagflation risk continues to heat up.

Swonk’s view aligns with that of market investors. She explained: “The likelihood of the Federal Reserve raising interest rates in the second half of the year is increasing. I expect the Federal Reserve to be forced to take this step, and other countries’ central banks will follow.” (Jin Shi)