Federal Reserve Chair Jerome Powell said rising energy prices will push inflation higher in the near term, while stressing that the central bank is not locked into any set course on interest rates.
Speaking after the Fed held rates at 3.50% to 3.75%, Powell said recent shocks have disrupted the progress made on inflation over the past year.
He said it is too early to judge how long the current pressures will last or how deeply they will affect the economy.
Oil shock seen feeding into inflation again
Powell said higher energy prices will lift overall inflation in the near term. He pointed to the Middle East conflict as a key source of uncertainty.
He said the economic impact of these developments remains unclear. But he acknowledged that a series of shocks has already interrupted the Fed’s path toward price stability.
The comments suggest the central bank is preparing for a more difficult inflation environment after months of gradual improvement.
Fed rejects preset rate path
Powell said policy decisions will be taken meeting by meeting. He stressed that the Fed is not following a fixed plan.
He also pushed back on market focus around the dot plot. He said the projections are not a decision or a commitment on future rate moves.
The Fed, he said, is in a position to wait and assess incoming data before acting.
Rates near neutral level after last year’s cuts
Powell said the rate cuts delivered last year have brought policy closer to what officials see as a neutral level.
This allows the Fed to hold steady while evaluating new risks.
He added that long-term inflation expectations remain anchored at the 2% target, despite recent pressures.
The message from the Fed is clear. Inflation risks are rising again. But policymakers are not ready to react yet. The next move will depend on how these pressures evolve.