The intersection of a possibly seminal Federal Open Market Committee (FOMC) interest rate meeting this week with the signing of a Memorandum of Understanding (MOU) to end the US conflict with Iran and open up the Strait of Hormuz is a good time to remind ourselves that the dual mandate of the Federal Reserve includes a commitment to price stability, NOT to price affordability. For many reasons, the re-opening of the Strait of Hormuz — if it actually happens— is likely to lower oil, gas and refined products prices but potentially by an insufficient amount to substantially affect near term prices experienced by consumers. Oil and gas production in the Gulf will take some time to restart, and the delivery of a wide variety of goods out of the Gulf will need to find ships that are likely scattered all over the globe. It is estimated that global water transport touches 80% of world trade in some way, shape or form, and while the ships stuck behind the blockades have been idle, others have not. In addition to the difficulties of re-energizing (pun intended) a supply chain, it is also likely that governments will be quietly focused on building back inventories of critical products that have been depleted. The US Strategic Petroleum Reserve, for example, has fallen 13 percent in the last year and stands close to a 50-year low (puzzlingly, it was not built-up before the conflict began, perhaps in part to keep retail gas prices low.) China moved aggressively over the past few years to stockpile supplies of critical products such as those impacted by the closure of the Strait, effectively insulating the world from even worse supply pressures over the last three and a half months; these stockpiles, having proven their worth, will be a focus of re-building efforts. Other countries have not typically held as large reserves as the US and China but may now wish to change that strategy. In sum, for some period of time to come, energy and refined products supplies (and the attendant services, such as transportation services) will still be insufficient to meet demand, and prices are likely to stay elevated for months.
Data to Watch
US Industrial Production for May, released Monday, June 15
US Housing Starts for May, released Tuesday, June 16
Federal Open Market Committee (FOMC) target interest rate decision and Federal Reserve Press Conference, Wednesday, June 17
Suggested Reading
Coders Were Tech’s MVPs. Now They’re Fighting to Stay in the Game
The way we were: Price-level shocks and consumers’ memories
The Global Economy Is Threatened Again by Trade Imbalances
Weekly Commentary
Week of June 14, 2026 – Weekly Economic Commentary
Jeanette Garretty
The intersection of a possibly seminal Federal Open Market Committee (FOMC) interest rate meeting this week with the signing of a Memorandum of Understanding (MOU) to end the US conflict with Iran and open up the Strait of Hormuz is a good time to remind ourselves that the dual mandate of the Federal Reserve includes a commitment to price stability, NOT to price affordability. For many reasons, the re-opening of the Strait of Hormuz — if it actually happens— is likely to lower oil, gas and refined products prices but potentially by an insufficient amount to substantially affect near term prices experienced by consumers. Oil and gas production in the Gulf will take some time to restart, and the delivery of a wide variety of goods out of the Gulf will need to find ships that are likely scattered all over the globe. It is estimated that global water transport touches 80% of world trade in some way, shape or form, and while the ships stuck behind the blockades have been idle, others have not. In addition to the difficulties of re-energizing (pun intended) a supply chain, it is also likely that governments will be quietly focused on building back inventories of critical products that have been depleted. The US Strategic Petroleum Reserve, for example, has fallen 13 percent in the last year and stands close to a 50-year low (puzzlingly, it was not built-up before the conflict began, perhaps in part to keep retail gas prices low.) China moved aggressively over the past few years to stockpile supplies of critical products such as those impacted by the closure of the Strait, effectively insulating the world from even worse supply pressures over the last three and a half months; these stockpiles, having proven their worth, will be a focus of re-building efforts. Other countries have not typically held as large reserves as the US and China but may now wish to change that strategy. In sum, for some period of time to come, energy and refined products supplies (and the attendant services, such as transportation services) will still be insufficient to meet demand, and prices are likely to stay elevated for months.
Data to Watch
US Industrial Production for May, released Monday, June 15
US Housing Starts for May, released Tuesday, June 16
Federal Open Market Committee (FOMC) target interest rate decision and Federal Reserve Press Conference, Wednesday, June 17
Suggested Reading
Coders Were Tech’s MVPs. Now They’re Fighting to Stay in the Game
The way we were: Price-level shocks and consumers’ memories
The Global Economy Is Threatened Again by Trade Imbalances
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