Markets Are Misreading Fed’s Response to Oil Surge, BofA Says

Investors betting on a hawkish response to rising oil prices could be misreading the Federal Reserve, according to Bank of America Corp., which warns that supply shocks can also result in periods of stable interest rates and even deep cuts.

While the two-year Treasury yield has moved in lock-step with surging oil prices since the start of the Iran war, reflecting expectations of higher borrowing costs, US economist Aditya Bhave warns this “could be a mistake.”