Overview
- Fed Vice Chair Michelle Bowman, speaking Friday, said it is too early to judge the full economic effect of the Iran‑related conflict but warned that a prolonged energy shock could broaden into sustained inflation.
- She said the central bank can look through a short, temporary rise in energy‑driven prices provided policymakers keep clear credibility in their commitment to lower inflation.
- Bowman described the current stance as moderately restrictive and defended the FOMC’s April decision to keep language that preserves the option of future rate cuts while awaiting more data.
- She said that should disruptions continue well into the second half of the year she would be more likely to shift her policy view toward tightening, a position that helps explain why markets have pushed back near‑term rate cuts and are pricing a longer hold or possible hikes.
- The warning comes as disinflation has slowed, oil and gasoline prices have risen and U.S. labor‑market signs show fragility, which together raise the risk that higher energy costs will squeeze households and complicate the Fed’s path to 2 percent inflation.