New York Federal Reserve Bank President John Williams stated that while he anticipates rising energy costs stemming from the Iran conflict will increase overall inflation, the outlook for underlying price pressures in the United States remains largely unchanged. In a Tuesday interview, he noted that the "fundamentals surrounding underlying inflation have not changed significantly," adding that he expects core inflation, which excludes food and energy, to rise by only 0.1 to 0.2 percentage points. Williams mentioned he has slightly lowered his U.S. economic growth forecast for 2026 to a range of 2% to 2.5%. Prior to the conflict, his projection was 2.5% to 2.75%. He also expects the overall inflation rate to increase. He emphasized that there is no current need to consider adjusting the Fed's benchmark interest rate, stating that "the current monetary policy stance is very appropriate" and sufficient to wait and observe the economic consequences of the Middle East conflict. "Monetary policy is already in the right place, and we can respond as needed if the situation evolves," he said. The Iran conflict is testing the Federal Reserve's dual mandate: surging energy prices could both restrain economic growth and intensify inflationary pressures. There are no signs of relief in the conflict's restrictions on global oil supplies, with the Trump administration further threatening strikes on Iranian civilian infrastructure starting Tuesday. In response, several Fed officials, including Chair Jerome Powell, have indicated that current interest rate levels are in a favorable position to temporarily balance the rising risks. Williams expressed increased confidence in the U.S. labor market following March's unexpectedly strong jobs report, which lowered the unemployment rate to 4.3%. He stated, "The labor market we are seeing now is much more stable and is definitely not a labor market that is weakening."
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