Inflation and Central Bank Outlook Post Hormuz (with Tom, Anna, Guy)

6/2/2026 10:47:16 AM	short term cautious up	5 days later	-4.92%	-2.46%
5/18/2026 8:51:01 AM	medium term cautious up	20 days later	-15.28%	-7.64%
5/11/2026 2:37:40 PM	short term up	6 days later	+6.34%	+6.34%
4/13/2026 9:18:40 AM	medium term up	20 days later	+16.59%	+16.59%

If the Strait of Hormuz reopens and slowly resumes, can I assume inflation comes down?

Guy

Sri Kutcha Kventan

This is one of the best scenarios if the strait reopens soon, but it will take time. We still have inflationary pressures in the US (PPI) and Japan. It will take weeks for de-mining and safe transit. The MOU has a 60-day negotiation period, so there is still tail risk.

We've moved from military action to diplomacy, which is excellent news from an inflation front.

Why is the bond market still pricing in hikes while the equity market is more optimistic?

Guy

Sri Kutcha Kventan

The bond market is pricing in hikes because we expect the Fed to be on hold for the rest of the year if the strait reopens. There is skepticism about the timeline. We are also seeing the impact of other materials (e.g., naphtha in Japan) filtering through. We think the market has priced in too much hawkishness. Communication this week is key.

For the BOJ, we need hawkish communication from the deputy governor to support the yen. For the Fed, it will be interesting to see how Chair Warsh conducts his first meeting and whether he shifts the narrative around AI's disinflationary impact versus near-term inflationary pressure.

What inflation risks are there in the AI build-out for the US?

Anna

Sri Kutcha Kventan

The near-term outlook for the AI build-out is inflationary due to pressure on resources (data centers, pipelines, cooling systems). The disinflationary argument is longer-term. The outlook over the next few years will be volatile inflation with spikes before we see the disinflationary impact from AI.

Is there a risk that Chair Warsh won't submit a dot plot? Is that how the communication strategy changes from the Fed?

Anna

Sri Kutcha Kventan

Yes, it is being speculated. Investors will be looking for whether the easing bias is dropped, which is broadly expected given dissent from other members. The overall tone of the FOMC will be key.

What does hawkish commentary from the BOJ deputy governor look like? Does it need to aim for a six-month cadence for hikes?

Anna

Sri Kutcha Kventan

It's difficult to expect the BOJ to give a cadence; they never do. We will be looking for details on the bond purchase program, bond market liquidity, and any references to the currency. Also, what they say about the impact on inflation now that the Strait of Hormuz is reopening.

The Japanese household is relatively buffered from inflation due to government policies, so navigating monetary decisions around that is complex.

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