Americans’ expectations for inflation will shape Fed’s response to Iran war, Powell says | CNN Business

The Federal Reserve’s response to the US-Israeli war on Iran largely hinges on how the conflict affects Americans’ expectations about inflation, Chair Jerome Powell said Monday. “The tendency is to look through any kind of a supply shock,” he said during a moderated conversation hosted by Harvard University. “But a critical, essential aspect of that is you have to carefully monitor inflation expectations.” The Fed chief also hinted at keeping interest rates unchanged in the short term, looking through the ongoing global energy price shock: “Monetary policy works with long and variable lags, famously, and so, by the time the effects of a tightening in monetary policy takes effect, the oil price shock is probably long gone,” he said. Powell’s latest remarks come as the Iran war stretches into its fifth week, with President Donald Trump threatening to destroy the country’s energy infrastructure if a deal isn’t reached to end the conflict and reopen the Strait of Hormuz, a major global chokepoint that handles one-fifth of the world’s oil supply, along with many other commodities. Oil prices rose Monday after Trump’s comments: Brent crude, the global benchmark,