How long will the Federal Reserve "ignore" the oil shock?

Topic: The Federal Reserve Announces It Will Hold Interest Rates Steady; Financial Institutions Expect the Fed May Cut Rates Only Once This Year

The Federal Reserve seems prepared to temporarily ignore the oil crisis triggered by the war between the United States and Israel and Iran.

Although the Fed typically turns a blind eye to highly volatile energy markets, Chair Powell said on Wednesday that steadily rising energy costs will push up prices and weigh on U.S. economic growth, which has been battered in recent years.

At a press conference, Powell said: “We have gone through tariff shocks and the pandemic, and now we are facing an energy shock of a certain scale and duration. People are concerned that events like this could cause trouble for inflation expectations.”

After Iran effectively cut off oil tanker shipping through the Strait of Hormuz, the benchmark U.S. oil futures price has surged 67% this year. According to data from the American Automobile Association (AAA), the average U.S. retail gasoline price jumped to $3.84 per gallon, while the average diesel price rose to $5.07 per gallon.

“Any tendency for the Federal Reserve to ignore energy prices should not be overstated,” said Seema Shah, Chief Global Strategist at Principal Asset Management. “If oil prices stay near current levels, households will face greater pressure, inflation expectations will edge higher, and the Fed’s policy dilemma will quickly intensify.”

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责任编辑：李桐