Powell: Middle East conflict raises inflation expectations; Fed has limited options to respond

Xinhua News Agency, New York, March 30 (Reporter Liu Yanan)—On the morning of March 30, Jerome Powell, the Chair of the U.S. Federal Reserve, said at an event at Harvard University that the Fed will closely watch the impact of the fighting in the Middle East on the U.S. economy and inflation expectations, though its policy options are limited.

Powell said the Fed is committed to bringing inflation down to its 2% target level. “There are some downside risks in the labor market, which means we need to keep interest rates low. But there are upside risks to inflation, which could mean we should not keep interest rates low. There is a conflict between these two policy goals.”

According to AP, Powell said it is crucial to closely monitor the inflation situation as the fighting in the Middle East has driven energy prices sharply higher, but the Fed’s response options are limited.

Powell also warned that the path of U.S. debt growth is unsustainable. “If we don’t do something soon, there won’t be a good outcome.”

Over the past month, the military conflict in the Middle East has pushed international crude oil futures prices up significantly, leading to a sharp rise in retail gasoline and diesel prices in the United States and increasing market worries about inflation rising.

A final reading of the March consumer sentiment index released by the University of Michigan on the 27th showed that Americans’ one-year inflation expectations rose from 3.4% in February to 3.8%, the largest month-over-month increase since April 2025.

(Editor: Wen Jing)

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                                                            Federal Reserve