Fed's Powell says no need to hike interest rates now — officials should look past higher energy prices

Core Viewpoint - Federal Reserve Chair Jerome Powell indicated that there is no immediate need to raise interest rates despite rising energy prices due to the war on Iran, suggesting that these price increases should be viewed as short-term impacts [1][6]. Group 1: Interest Rate Policy - Powell stated that the current target range for interest rates of 3.5% to 3.75% is appropriate as the Fed assesses the long-term effects of the Iran war and tariffs on prices [6]. - The likelihood of an interest rate hike by December has dropped significantly to 2.2%, down from over 50% earlier in the week, reflecting traders' reactions to Powell's comments [5]. - Powell emphasized that raising interest rates now would be ineffective, as the effects of monetary policy take time to manifest in the economy [6][7]. Group 2: Economic Context - Powell noted that inflation expectations appear to be well anchored beyond the short term, but acknowledged that the Fed may need to address this issue in the future [2]. - He mentioned that the economic effects of the current energy supply shock are still uncertain, and the Fed will remain mindful of the broader economic context when making decisions [4][6]. - Fed Governor Stephen Miran, who has consistently dissented in meetings, supports the idea of looking through the current energy supply shock and suggests that interest rates could be lowered gradually over the course of a year [7][8]. Group 3: Future Outlook - The Fed's recent meeting indicated a divided outlook among policymakers, with some members not expecting any rate cuts this year, while the "dot plot" suggests one rate cut this year and another in 2027 [9]. - Powell refrained from commenting on the plans of his potential successor regarding interest rates, highlighting the uncertainty surrounding future Fed leadership [10].