Powell Warns Energy Price Surge ‘Has Not Yet Peaked’ as Fed Stays on Hold
Reflecto News | Economy & Policy | U.S. News
WASHINGTON — Federal Reserve Chair Jerome Powell issued a stark warning on Wednesday that the global surge in energy prices triggered by the Iran war has “not yet peaked” and could intensify its drag on the economy if the conflict drags on much longer .
Speaking after the Fed’s policy meeting, Powell stressed that the full weight of the oil shock may still be ahead, leaving the central bank in an unusually divided holding pattern .
“The energy price surge has not yet peaked.”
— Jerome Powell, Federal Reserve Chair
⚠️ Oil Shock: Still Ahead or Already Here?
Powell’s “has not yet peaked” warning suggests that the worst of the price spike may still be to come, even with Brent crude already hovering around $119 per barrel .
He noted that the impact of higher energy prices was currently being felt more acutely in Europe and Asia, but that U.S. consumers and businesses would feel the effects more powerfully if the disruption to Middle East supplies continued for “much longer” .
The war began on February 28 with U.S.-Israeli strikes on Iranian nuclear facilities, and Iran responded by effectively closing the Strait of Hormuz, a chokepoint for about 20 percent of the world’s oil supply .
📉 Fed Stays in ‘Wait-and-See’ Mode: Unusually Divided Meeting
The Federal Open Market Committee (FOMC) voted 8-4 to keep the benchmark federal funds rate steady in the 3.50%–3.75% range – the third consecutive hold since the start of the year . The level of dissent among policymakers was the highest since October 1992 .
The committee upgraded its inflation language from “somewhat elevated” to “elevated” in its post-meeting statement, directly citing the recent increase in global energy prices .
💬 A More Hawkish Powell?
During his press conference, Powell struck a notably more hawkish tone than in recent months, even as his own term draws to a close .
- No Cuts Imminent: Powell insisted that the Fed wants to see “clearer evidence” that energy and tariff pressures are fading before even considering rate cuts .
- Shift Away from Easing: He flagged that the removal of the Fed’s easing bias could come as early as the next meeting, signaling that the central bank may be preparing markets for a potential rate hike, not a cut, later in the year .
- Divided Outlook: Powell acknowledged that the number of officials who see a rate hike as just as likely as a rate cut has “moved up,” underscoring a significant shift in internal sentiment since the war began .
🔮 Powell’s Farewell?
Wednesday’s meeting may be Powell’s last as Fed chair, as his term expires on May 15 . President Trump has nominated Kevin Warsh to succeed him, a selection that has faced a bumpy confirmation road .
Powell told reporters he would stay on the Fed’s Board of Governors after his chairmanship ends, but declined to give a specific timeline for his departure, saying, “I will leave when I think it is appropriate to do so” . Powell said he would not serve as a “shadow chair” to his successor, indicating he would step back from active leadership once Warsh is confirmed .
📊 Key Takeaways
| Aspect | Summary |
|---|---|
| Powell’s Warning | “The energy price surge has not yet peaked.” |
| Fed Decision | Held rates at 3.50%-3.75% (third straight hold). |
| Committee Split | 8-4 vote, the most dissents since October 1992. |
| Inflation Language | Upgraded to “elevated,” citing global energy prices. |
| Shift in Tone | Powell signals a move away from an easing bias. No rate cuts imminent; potential for future hikes is now on the table. |
| Underlying Threat | The Strait of Hormuz remains largely closed, keeping supply lines choked. |
| Powell’s Future | Plans to remain on Fed Board after chair term ends (May 15). Will not interfere with successor Kevin Warsh. |
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