Fed Official: "Inflation Control Comes First"... Lower Expectations for Rate Cuts

Tariff Pressures and Surging Energy Costs
Inflation Likely to Persist Longer Than Expected

As the war in the Middle East drags on, senior officials at the U.S. Federal Reserve (Fed) have issued collective warnings. Rather than economic contraction, they identified "energy-driven inflation" as the greater threat. This has strengthened expectations that the period of high interest rates may last longer than previously anticipated.

On the 19th (local time), Lisa Cook, Federal Reserve Board member (right), arrived at the Board meeting held at the Federal Reserve in Washington D.C. Washington (USA) = Photo by AFP

On the 26th (local time) during a discussion at Yale University, Lisa Cook, Federal Reserve Board member, stated, "The shock to the oil market caused by the Iran war now means the Fed's focus is fixed not on employment, but on inflation." She added, "As the rising energy costs from the war pile onto tariff pressures, it has become even more difficult to control inflation." She warned, "We may have to remain in this situation—responding to high inflation—much longer than we expected."

On the same day, other key Fed officials, including Vice Chair Michael Barr and Vice Chair Philip Jefferson, also expressed their concerns. Vice Chair Barr said, "The biggest concern is that a prolonged surge in energy prices could fuel inflation expectations," emphasizing, "It is appropriate to maintain the current high interest rate stance and monitor the situation." Vice Chair Jefferson stated, "We will closely monitor whether the oil price shock spreads to higher prices for other goods," warning of a "domino effect" in which rising energy costs push up prices across the economy.

At its meeting held on the 17th and 18th, the Fed kept interest rates unchanged, citing uncertainty caused by the war. Currently, the inflation rate in the United States exceeds the target of 2%, and the surge in oil prices is making further increases inevitable.

The market now sees little chance that interest rates will be lowered in the coming months.

This content was produced with the assistance of AI translation services.