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

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

Powell said the Fed is committed to bringing inflation down to its 2% target level. “There is some downside risk in the labor market, which means interest rates need to stay low. But there is upside risk to inflation, which may mean interest rates should not stay low. There is a contradiction between the two policy objectives.”

According to a report by The Associated Press, Powell said it is crucial to closely monitor inflation conditions as the war in the Middle East drives a surge in energy prices, but the Fed’s response options are limited.

Powell also warned that the trajectory 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 significantly higher, driving a sharp increase in U.S. retail gasoline and diesel prices and raising market concerns about inflation rising.

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

(Editor: Wenjing)

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                                                            Federal Reserve