Los effects of the war in Iran on inflation have attracted the attention of the Reserva Federal (FED) It is that he vice president for supervision, Philip Jeffersonhas pointed out that the conflict in the Middle East will raise inflation in the short term. Which will keep interest rates stable, since they are well positioned to respond to various economic scenarios according to Jennifer Schonberger and Yahoo Finance.
«At least in the short term, I expect headline inflation to rise, reflecting the rise in energy prices stemming from the conflict in the Middle East,» Jefferson said in a speech in Dallas.
«Looking ahead, I believe the current policy stance allows us to determine the extent and timing of additional adjustments to our interest rate,» Jefferson added.
Jefferson is closely monitoring the situation in both the Middle East and global energy markets, but noted that it is still too early to predict the impact on the economy. He stressed that the effects of the war in the Middle East will depend largely on How long will energy prices stay high?. He noted that a short period of disruption is unlikely to have a noticeable effect on the economy beyond one or two quarters, but that sustained high oil prices could have important consequences.
Jefferson stated that the increase in oil prices to date should have relatively moderate effects on inflationalthough consumers are already seeing higher prices at the pump.
It indicated that it is monitoring the situation to see if these higher costs are incorporated into prices throughout the economy.
«The longer energy prices remain high, the more households will have to make difficult decisions. Families who rely on oil and gas to get to work and school, and to heat their homes, may have to reduce their discretionary spending,» Jefferson warned. This could result in less spending in restaurants or stores, as well as increased household debt.
He noted that the current uncertainty over tariff policy and the recent rise in energy prices complicate the economic outlook for the Federal Reserve regarding inflation and maintaining full employment.
Before the start of the conflict in Iran, inflation had remained above the target of the 2% of the Federal Reserve for five years, and progress in reducing it appeared to have stalled last year. Jefferson attributed this mainly to the dutybut also noted that inflation of servicesexcluding housing, has remained practically stable over the last year. However, this is offset by a strong productivity growth and deregulation.
The labor market, according to Jefferson, is «roughly balanced,» but risks tilt to the downside. He indicated that he hopes that the unemployment rate remains around its current level of 4.4% this year, but overall job creation is likely to remain low. He said he is keeping an eye on the pace and composition of job creation when assessing the health of the labor market.
Even so, he expects the economy to expand at a similar or slightly higher rate than last year, although he noted that uncertainty surrounding its prospects is high.
«Uncertainty about the economy is high, and rising energy prices and conflict in the Middle East add to that uncertainty,» Jefferson said. “However, I still consider that our current political stance is appropriate to evaluate the evolution of the economy.”
Speaking separately in Washington, DC, on Thursday evening, Federal Reserve Governor Michael Barr He also noted that recent disruptions, from the oil rally to tariffs, have complicated the Federal Reserve’s efforts to reduce inflation to 2%.
Like Jefferson, Barr indicated that if the conflict with Iran ended soon, the effects on inflation and the economy could be limited, but if the war continues, it could have broader repercussions on both.
Barr is concerned that inflation has remained above the Federal Reserve’s target for five years and that another rebound in oil prices, if sustained, could raise long-term inflation expectations.
“Given the considerable uncertainty about the potential effects of events in the Middle East on our economy, as well as the other factors I mentioned, it is wise to take some time to evaluate the situation,” Barr said. “Our current political stance puts us in a good position to maintain stability.”