Morgan Asset Management believes that the threshold for the Federal Reserve to raise interest rates is very high.

Tai Hui, Chief Market Strategist for Asia Pacific at Morgan Asset Management, said that the Federal Reserve may keep interest rates unchanged in the foreseeable future. Tai Hui stated that as most committee members believe that the current policy stance is neutral, the Fed can afford to remain patient and observe the impact of the Middle East conflict on the economy and inflation. He also mentioned that the diverging views among decision-makers indicate a lack of consensus within the Fed during this period of high uncertainty, which may continue even after the new chairman takes office. He added that optimists may view this divergence as necessary in a time of increasing uncertainty and investors demanding Fed independence. Despite the rise in US Treasury yields, the trend is not enough to support a bullish view due to the tail risk of higher inflation and potential disruptions to navigation in the Strait of Hormuz without a clear resolution path. Additionally, the upward risk to the US fiscal deficit is also a pressure point.