Powell says Fed can look past energy shock, but won’t ignore inflation risks

Jerome Powell on Monday said the US Federal Reserve remains committed to bringing inflation back to its 2% target, while signalling it is in no hurry to change policy amid rising global uncertainties.

Speaking at a moderated discussion at Harvard University, Powell said monetary policy is currently in a “good place” to wait and assess how evolving conditions play out.

“We will get inflation back to 2%… we are committed to getting it there on a sustained basis,” he said.

Powell acknowledged that the ongoing conflict in the West Asia could push up energy prices, but noted that central banks typically “look through” such supply shocks as they tend to be short-lived. However, he cautioned that the current environment may be different after a prolonged period of elevated inflation.

He said the Fed would be closely watching whether rising prices begin to shift inflation expectations among households and businesses. If expectations start to drift higher, the central bank may not be able to remain on the sidelines.

“We don’t know what the economic effects of the current situation will be,” Powell said, adding that inflation expectations for now remain “anchored”.

His remarks come as markets expect the Fed to hold interest rates steady through the year, even as risks from geopolitical tensions, tariffs and a softening labour market persist. Powell had earlier described the US economy as growing at a “solid pace” and dismissed concerns of stagflation.

The appearance is among Powell’s final scheduled engagements before his term ends on May 15, with uncertainty around the confirmation of his successor still lingering.