Fed’s Powell says no need to hike interest rates now, officials should look past higher energy prices
Federal Reserve Chair Jerome Powell stated on Monday that it is unnecessary to raise interest rates at the moment, despite the surge in energy prices due to the conflict in Iran.
During a Q&A session at Harvard University, Powell emphasized the importance of focusing on stable prices and low unemployment, suggesting that policymakers should not be alarmed by short-term energy supply shocks.
While acknowledging that inflation expectations seem well anchored in the long term, Powell hinted at the possibility of addressing inflation concerns in the future.
Powell’s remarks eased concerns among traders, leading to a significant drop in the likelihood of an interest-rate hike by December, according to CME FedWatch.
He emphasized that the current interest rate range is suitable as the Fed monitors the potential long-term impact of the Iran conflict and trade tariffs imposed by President Trump.
Powell highlighted that implementing monetary policy changes takes time to affect the economy, making it futile to raise interest rates preemptively to counter inflationary effects of the conflict.
Additionally, Fed Governor Stephen Miran expressed support for lowering interest rates gradually over the course of a year to counter the current energy supply shock.
Despite divisions within the Fed, most policymakers maintained their outlook for the year with expectations of one rate cut in 2026 and another in 2027.
When questioned about his successor’s stance on interest rates, Powell refrained from commenting, citing ongoing issues related to the nomination process.
Meanwhile, Trump’s nominee for Powell’s position, Kevin Warsh, faces obstacles in the confirmation process due to Senator Thom Tillis’s demands regarding a criminal probe into Powell and the Fed’s budgetary concerns.
As the situation unfolds, Warsh remains optimistic about his ability to implement rate cuts swiftly, contrasting with Trump’s previous criticism of Powell’s approach to monetary policy.
US Attorney Jeanine Pirro’s legal actions regarding Powell’s subpoenas add another layer of complexity to the ongoing developments within the Federal Reserve.
