Federal Reserve Chair Jerome Powell said on March 30 that the Fed can look through recent oil-price volatility tied to tensions in the Middle East, arguing that policymakers are not under pressure to respond quickly with a rate change. Speaking at a Harvard University economics class discussion, Powell said the current policy stance is in a “good place,” with the federal funds target range still at 3.5% to 3.75%.
Short-term oil moves are not driving immediate action
Powell said monetary policy works with “long and variable lags,” meaning the impact of a rate move may arrive only after a supply-driven oil shock has already faded. That is why the Fed is inclined to look through this kind of short-term disturbance instead of reacting to every jump in energy prices.
He added that the recent rise in oil has not yet created a “hard choice” for the central bank. Officials still have room to wait and watch. At the same time, Powell said the Fed is closely tracking inflation expectations: near-term expectations may be affected by oil, while longer-term inflation expectations remain well anchored.
Balancing inflation and employment remains difficult
Powell described the current backdrop as a textbook policy dilemma under the Fed’s dual mandate. Job growth is slowing, which argues for lower rates to support employment. Inflation, though, is still above the 2% target, and tariffs are contributing to a one-off increase in prices, limiting how far rates can be cut.
He said the Federal Open Market Committee is not in full agreement on the next step, but broad support remains in favor of holding policy steady. Powell also pushed back on comparisons with 1970s-style stagflation, saying US economic growth remains solid and the unemployment rate is relatively stable.
Private credit is being watched closely
Powell also addressed the private credit market, an area that has drawn close attention on Wall Street. He said the Fed is watching it “super carefully.” Some investors may face losses, he said, but policymakers have not seen signs that would point to a systemic financial crisis.
On the balance sheet, Powell repeated that large-scale asset purchases can lower rates and support the economy. He also said the Fed has not so far observed the expected negative risks tied to balance-sheet expansion. The message from the discussion was straightforward: for now, policymakers prefer patience over a rapid policy shift.