Bank of America economists have identified three conditions that could force the Federal Reserve to raise interest rates-despite widespread expectations of cuts. These include: a prolonged Iran conflict sustaining oil prices above $80 per barrel, unemployment remaining below 4.5%, and Fed Chair Jerome Powell serving beyond his expected May departure.
West Texas Intermediate crude has surged to $109 per barrel since the Iran conflict disrupted global energy corridors, threatening broader inflation as shipping costs for fertilizer and aluminum spike. Core inflation already sits at 2.8%, well above the Fed’s 2% target for nearly five years.
Bitcoin, trading near $70,000, faces near-term pressure if rates rise, but experts warn it could thrive as a monetary hedge. CoinShares’ James Butterfill and Hashdex’s Gerry O’Shea both argue that institutional investors view Bitcoin as an "asset of fear"-akin to gold-in a potential stagflation environment.
Powell, seen as less dovish than his likely successor Kevin Warsh, may extend his tenure until Senate confirmation, increasing the chance of a June rate hike. Analysts at Grayscale note Bitcoin’s resilience reflects recovering sentiment, stablecoin momentum, and tokenization trends.
While the Fed typically ignores volatile energy prices, Bank of America warns that persistent supply shocks could rewire inflation expectations-making a rare rate hike a real, if unlikely, scenario.