Fed Officials Voice Growing Concern Over Fallout from Iran War

Article content(Bloomberg) — Three Fed officials on Thursday expressed growing anxiety over the US economic outlook due to the war in the Middle East, with one policymaker saying the spike in oil prices had shifted the balance of risks for now, leaving inflation as a bigger concern than employment.Sign In or Create an AccountEmail AddressContinueor View more offersArticle content“I would argue that the inflation risk is greater right now as a result of the Iran war,” Fed Governor Lisa Cook said Thursday while answering questions after a speech in New Haven, Connecticut. “With respect to the labor market, I see it as being in balance, but precariously so.”Article contentWe apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.Article contentArticle contentCook gave no indication of how she thought policymakers should respond, though two of her colleagues, also speaking Thursday, said they preferred to keep rates on hold as they assessed how the war might affect inflation and growth.Article contentTop StoriesGet the latest headlines, breaking news and columns.There was an error, please provide a valid email address.Sign UpBy signing up you consent to receive the above newsletter from Postmedia Network Inc.Thanks for signing up!A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Article content“It makes sense to take some time to assess conditions,” said Fed Governor Michael Barr in remarks at an event in Washington. “Our current policy stance puts us in a good place to hold steady while we evaluate incoming data.”Article contentBarr highlighted that even before the war sent energy prices higher, he was concerned the impact of tariffs on inflation might continue beyond this year.Article contentIf the war continues on for some time, “the spike in energy prices and other commodities could have broader implications for both prices and economic activity,” he said. “I am particularly concerned that yet another price shock could increase longer-term inflation expectations.”Article contentFed Vice Chair Philip Jefferson also said the length of the conflict and its impact on energy prices would prove crucial.Article content“An extended bout of elevated energy prices could put upward price pressure on a variety of other products,” he said. “As a policymaker, I will monitor to see if these higher costs become embedded in prices throughout the economy.”Article contentArticle contentThe US central bank left interest rates unchanged at its March 17-18 policy meeting, and noted elevated uncertainty created by the war. It’s trying to balance inflation, which was about a percentage point above its 2% target in January and is set to climb further on the back of a surge in oil prices, against a labor market that has seen very little hiring over the past year.Article contentCook said tariffs had already moved inflation away from the Fed’s target, and that the Middle East situation could potentially have a substantial effect also.Article content“We could be at this for much longer than we anticipated,” Cook said. “So I think right now, the balance of risks has shifted more to inflation.”Article contentFed Governor Stephen Miran said at an event in Miami that he still thinks underlying inflation is heading toward 2% over the coming 12 months. Article contentMiran also said it is possible the Fed could shrink its balance sheet by $1 trillion to $2 trillion, but cautioned that many accompanying measures would be required and the process could take years.Article content—With assistance from Catarina Saraiva and Jonnelle Marte.Article contentTrending Meet the Canadian e-bike maker who is redefining the factory floor Electric Vehicles Markets could be making the wrong call on interest rates Investor Iran oil revenue soars as it's the only exporter out of Hormuz Oil & Gas Quebec demands Air Canada’s CEO resignation in 92 to 0 vote Airlines LNG Canada signs key pipeline agreement required for phase two expansion Energy Share this article in your social networkCommentsYou must be logged in to join the discussion or read more comments.Create an AccountSign in Join the Conversation Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information. Meet the Canadian e-bike maker who is redefining the factory floor Electric Vehicles Markets could be making the wrong call on interest rates Investor Iran oil revenue soars as it's the only exporter out of Hormuz Oil & Gas Quebec demands Air Canada’s CEO resignation in 92 to 0 vote Airlines LNG Canada signs key pipeline agreement required for phase two expansion Energy