U.S. Federal Reserve (Fed) Chair Jerome Powell said on the 18th (local time) that energy price increases caused by a war among the United States, Israel and Iran are expected to spur U.S. inflation in the short term.
At a news conference held after the decision to keep the benchmark interest rate unchanged, Powell said, "Over the past few weeks, short-term inflation expectation gauges have risen, which appears to reflect a surge in oil prices caused by supply disruptions in the Middle East." The Fed kept the benchmark rate at 3.50% to 3.75%.
He also said, "In the short term, higher energy prices could push up overall inflation, but it is still too early to judge the scope and duration of the potential impact on the economy," adding, "The effect of the Middle East situation on the U.S. economy is uncertain."
In particular, Powell said, "Inflation is expected to ease to some extent, but not as much as anticipated. That can be confirmed starting in the middle of the year as progress related to the tariff begins to appear," adding, "The rate outlook depends on economic performance, so if the economy does not make progress, there will be no rate cuts."
On concerns about stagflation, he said, "It is not appropriate to characterize the current situation as stagflation," assessing that it is markedly different from the 1970s. He explained, "The term 'stagflation' was a concept used in the 1970s, when the unemployment rate was in the double digits and inflation was also very high," adding, "The unemployment rate is very close to its normal level in the long run, and the inflation rate remains only 1 percentage point above normal."
Powell, whose term as chair ends on May 15, will preside over next month's rate decision meeting for the last time as chair. On questions about his future, he said, "If a successor is not appointed before the end of my term, I will serve as acting chair and continue to carry out my duties." He added, "That is what the law requires," and said, "Including me, that has happened several times."
Regarding a Ministry of Justice investigation targeting him, Powell stressed, "I have no intention whatsoever of leaving the board until the investigation is transparent and completely finished to a final conclusion." However, he added that he has not yet decided whether he will remain a Fed governor if the investigation ends and a successor takes over as chair.
Earlier, U.S. President Donald Trump nominated former Fed Governor Kevin Warsh to succeed Powell as chair. However, with Republicans holding a narrow edge on the Senate Banking Committee, Republican Sen. Thom Tillis is maintaining his opposition to confirming Warsh until the investigation surrounding Powell is resolved.