The Federal Reserve Bank of New York President Warns: Iran War Drives Up Oil Prices, Inflationary Pressures Could Persist for Another Year

Recently, John Williams, President of the Federal Reserve Bank of New York, issued a warning in an interview with the media that the surge in oil prices driven by the geopolitical situation surrounding Iran could trigger chain reactions across the overall economy through multiple channels.

Williams is concerned that rising energy costs will not only directly impact inflation data but may also gradually seep into consumer spending, corporate production costs, and other areas, thereby increasing economic outlook uncertainty.

He also pointed out that the effects of rising oil prices will not stay confined to transportation but will spread to broader economic sectors such as airline ticket prices, manufacturing, and service industries.

Although this transmission process takes time to fully manifest, as fuel costs rise, price pressures in related industries will gradually accumulate, often taking several months or even a year to produce full effects.

Since Trump’s military action against Iran on February 28, the average U.S. regular gasoline price has surpassed $4 per gallon, an increase of over $1 compared to pre-war levels.

Meanwhile, the closure of the Strait of Hormuz has further heightened supply concerns, as this critical passageway accounts for about 20% of global oil supplies annually.

High energy prices not only push up inflation and squeeze household disposable income but also exert dual pressure on price levels and economic demand, posing challenges to the overall economy.

Williams admitted that, in the face of such energy price shocks triggered by sudden geopolitical factors, the Federal Reserve’s monetary policy has certain limitations. However, he also emphasized that the New York Fed has prepared thoroughly for potential risks.

He further stated that, although the Fed cannot control all fluctuations in gasoline prices, it can adjust its policy stance flexibly to balance risks faced in achieving its dual mandate of price stability and maximum employment.

When discussing interest rate decisions, Williams highlighted the importance of forward-looking thinking, noting that monetary policy actions typically take at least a year to fully impact the economy, so decisions must focus on economic trends over the next one to two years.

#通胀压力 # monetary policy