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Powell says rates may need to remain elevated amid little progress on inflation

U.S. Federal Reserve Chair Jerome Powell holds a press conference following a two-day meeting of the Federal Open Market Committee on interest rate policy in Washington on March 20, 2024.

Elizabeth Frantz | Reuters

Federal Reserve Chair Jerome Powell said Tuesday that interest rates could need to stay higher for longer as the battle to bat down inflation continues.

Powell said during a panel that there had been little progress on bringing down price growth this year. Due to this, he said monetary policy could need to remain in place.

“More recent data shows solid growth and continued strength in the labor market, but also a lack of further progress so far this year on returning to our 2% inflation goal,” the Fed chief said.

“The recent data have clearly not given us greater confidence, and instead indicate that it’s likely to take longer than expected to achieve that confidence,” he said. “That said, we think policy is well-positioned to handle the risks that we face.”

— Alex Harring, Jeff Cox

Iran attack on Israel raises risk in Middle East over long term, Obama national security advisor says

Iran’s weekend air assault on Israel has raised the risk in the Middle East over the long term, said Tom Donilon, national security advisor during the Obama administration.

Crude oil prices have fallen over the past two trading sessions, as fears of a wider war have eased after Israel and its U.S.-led allies successfully repelled the attack. But Donilon said the current cycle of conflict is not yet over as Israel will likely respond to the strike.

Iran is now prepared to respond directly, in many cases from its own territory, to any attack from Israel on any Iranian interest or person, said Donilon, who is also chairman of the BlackRock Investment Institute.

“Long term, it is a structural increase in the risk profile,” said Donilon. The former national security advisor said he is increasingly worried about the risk of terrorist attacks in the West as the Israel-Hamas war drags on.

“The longer this goes on, I am becoming increasingly concerned about knock-on effects in terms of terrorism here in the United States, especially in Europe,” Donilon said. The number of potential threats and plots that were foiled, particularly against Jewish institutions, are very high, he said.

Donilon’s comments were interrupted by protestors who called for Columbia to divest from fossil fuels.

— Spencer Kimball

Fed’s Jefferson sees inflation falling as policy stays on hold

Federal Reserve Governor Philip Jefferson said Tuesday that he expects inflation to continue to decline as the central bank keeps its restrictive policy in place.

“My baseline outlook continues to be that inflation will decline further, with the policy rate held steady at its current level, and that the labor market will remain strong, with labor demand and supply continuing to rebalance,” Jefferson said in a discussion about how policymaking has changed over the years.

“Of course, the outlook is still quite uncertain, and if incoming data suggest that inflation is more persistent than I currently expect it to be, it will be appropriate to hold in place the current restrictive stance of policy for longer,” he added.

Markets currently are pricing in the Fed to stay on hold until September, then slowly begin cutting rates.

— Jeff Cox

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