Fed Vice Chair Says Current Interest Rates Appropriate Despite Iran War

(MENAFN) US Federal Reserve Vice Chair Philip Jefferson said Tuesday that the central bank’s current interest rate stance remains suitable, despite heightened uncertainty stemming from the Iran war, trade policy challenges, and rising energy prices.

In prepared remarks at the University of Detroit Mercy, Jefferson noted that the recent spike in energy costs is likely to push headline inflation higher in the near term, while geopolitical tensions and trade policy uncertainties continue to cloud the economic outlook.

“I remain cautious about my outlook,” Jefferson said. “Uncertainty about the economy is elevated, and the rise in energy prices and the conflict in the Middle East add to that uncertainty.”

He added that the Fed’s current policy setting is generally in a neutral range that neither stimulates nor restrains economic activity, allowing the central bank to evaluate incoming data while supporting employment and guiding inflation back toward its 2% target as tariff effects diminish.

Jefferson also said he expects the broader disinflation trend to continue, though he warned that the Iran conflict and pressures in energy markets have complicated the inflation forecast.

“The recent increase in energy prices, however, will apply some upward pressure on headline inflation, at least in the near term,” he said. “The ongoing trade policy uncertainty and geopolitical tensions pose upside risk to my inflation forecast.”

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