In all likelihood, the Federal Reserve Board will leave interest rates unchanged when it concludes its two-day meeting on Wednesday. Yes, inflation remains above the Federal Reserve’s 2% target, but that is largely because of transitory factors such as higher energy prices, which are a consequence of geopolitical events rather than excessive demand by American households.

Importantly, before the Iran war began, inflation was moving toward the Federal Reserve’s 2% target, and financial markets were even speculating about rate cuts. Now, almost entirely because of the spike in energy prices caused by the conflicts in Iran and Ukraine, some market participants believe a rate hike is warranted. That view is misguided.