Officials at the U.S. Federal Reserve have expressed concern about the outlook for the American economy amid the Iran war. During a speech in New Haven, Connecticut, board member Lisa Cook stated, “I think the risks of inflation have become greater due to the war.” She added that the labor market is in a balanced phase, but cautiously. Cook did not provide any indications on how policymakers should act. However, she noted that tariffs have pushed inflation away from the Federal Reserve's target rate, and the situation in the Middle East could also have a tangible impact. Cook said, “I believe the balance of risks has now moved more toward inflation.” Board member Michael Bar stated that “it makes sense to allocate some time to assess the conditions,” adding that the current policy puts them in a good position to remain steady while evaluating incoming data. Bar, as reported by Bloomberg, said that “even before the war led to higher energy prices, he was concerned that the impact of tariffs would lead to inflation continuing beyond this year.” He warned, “If the war continues for some time, the increase in energy and other commodity prices could have greater implications for prices and economic activity.” Bar expressed particular concern that “another price shock could lead to an increase in long-term inflation expectations.” Vice Chair of the Federal Reserve Philip Jefferson stated that the duration of the conflict and its impact on energy prices would be of paramount importance. He also noted, as reported by Bloomberg, that “continued rising energy prices could impose pressures to increase the prices of various goods.” He added, “As a policymaker, I will monitor whether the increase in costs will become entrenched in prices across various aspects of the economy.”
