Powell Says US Long Term Inflation Expectation Intact

Catenaa, Monday, March 31, 2026- US Federal Reserve Chair Jerome Powell said longer-term inflation expectations appear to be in check, but is closely monitoring them as it assesses the effects of the Iran War.

Inflation expectations seem to be “well anchored beyond the short term,” Powell said Monday during an event at Harvard University in Cambridge, Massachusetts. He added that officials may need to respond to the conflict’s impact, but that’s not the case yet.

“We don’t know what the economic effects will be,” he said. “We do think our policy is in a good place for us to wait and see,” he added.

Oil prices have jumped significantly since the war started a month ago, which could stoke inflationary pressures while also weighing on consumer demand and economic growth. 

Such a scenario would pose challenges for the Fed’s policymaking, since the central bank aims to foster both maximum employment and stable inflation.

“The tendency is to look through any kind of a supply shock, but a critical essential aspect of that is you have to carefully monitor inflation expectations,” Powell said.

He estimated that tariffs are adding somewhere between 0.5% and 1% to inflation, but that it will be a one-time price increase that will pass through. Absent tariffs, inflation would be closer to 2%, Powell said. 

Inflation measured by the Fed’s preferred inflation gauge, the Personal Consumption Expenditures index excluding volatile food and energy prices, sits around 3%.

US stocks climbed higher after the remarks by Powell.

Fed policymakers noted heightened economic uncertainty when they held interest rates steady earlier this month for a second straight time. Following that decision, Powell emphasized the need to see more evidence that inflation is moving toward their 2% goal before policymakers would consider cutting rates again.

In recent weeks, jitters in the private-credit space have spooked investors about the sector, leading some investors to demand early withdrawals. Some private-credit funds have also blocked investors from pulling money out.

Asked about the turmoil, Powell said “we’re watching it super carefully” and that a correction is happening in the space.

“I’m reluctant to say anything that suggests that we’re dismissive of the risk, but we’re looking for connections to the banking system and things that might, you know, result in contagion,” he said. “We don’t see those right now.”