White House Chief Economic Advisor Hassett recently signaled that reaching an agreement on Iran could trigger a precipitous drop in energy prices. This would ease inflationary pressure and create a window for the Federal Reserve to cut interest rates. During a media interview, he elaborated on the administration's view of current prices and funding costs, stressing that the primary driver of rising inflation is the energy sector, rather than fluctuations in core goods and services. Hassett made it clear that once a truce is secured, the sharp decline in energy costs will grant the central bank ample policy space to pursue the appropriate interest rate trajectory. Furthermore, the White House disclosed readiness with contingency plans for a potential blockade of the Strait of Hormuz, reaffirming support for monetary policy independence and backing the incoming Federal Reserve Chair Walsh's commitment to an independent stance.

However, actual macroeconomic data has not fully validated the official optimism. The latest Consumer Price Index figures show both month-on-month and year-on-year gains exceeding expectations, with a surge in energy spending playing a pivotal role. Public anxiety over future price trends is mounting, driving long-term inflation expectations higher. While Treasury Secretary Bessent insists current inflation volatility is temporary and supply chain disruptions will eventually subside, sentiment in the bond market has already shifted. With geopolitical negotiations stalling, capital previously betting on rate cuts is retreating, and traders are increasingly pricing in the possibility of rate hikes. Some seasoned financial observers note that as the new chair assumes office, confronting persistently high inflation expectations and climbing Treasury yields, the policy direction may be undergoing a quiet shift.

Mainstream industry opinion holds that discussing rate cuts prematurely lacks credibility before geopolitical conflicts are fully resolved. One prominent economist even warned that to offset the lingering effects of prior loose policies, the Federal Reserve might need to implement rate hikes to stabilize prices. Concerns are also surfacing within regulatory circles; if short-term inflation expectations continue to worsen, stronger measures cannot be ruled out. From a political maneuvering perspective, soaring fuel prices directly impact the ruling party's electoral prospects, which may underpin the White House's urgency to see oil prices fall. Although senior officials have sidestepped election-related topics publicly, the entanglement of economic policy and political interests is evident. Even if hostilities cease tomorrow, rebuilding damaged energy infrastructure is not a task for a single day. Should high energy prices become entrenched in the inflation framework long-term, policymakers may face an unwelcome scenario: failing to achieve rate cut targets and potentially being compelled to launch a new cycle of rate hikes.