Federal Reserve Chair Jerome Powell expressed deep sorrow Thursday over the escalating global conflict, noting the violence is on track to push the central bank's preferred price index past the 4 percent threshold.
WASHINGTON — Federal Reserve Chair Jerome Powell struck a somber tone on Thursday while warning that the worsening global conflict could soon inflict irreparable harm on the central bank’s most cherished price metric. Speaking to reporters, Powell expressed deep concern over the mounting devastation, noting that a war-driven spike in energy costs is currently threatening to push his favorite top-line inflation gauge past the dreaded 4 percent mark.
The gauge, which Powell has closely monitored throughout his tenure, tracks changes in the prices of goods and services purchased by consumers. Fed insiders report that the chairman has grown increasingly protective of the metric in recent months, frequently checking its stability during the night and expressing visible distress when volatile global violence threatens its overall health.
Powell urged international leaders to consider the widespread suffering that a prolonged conflict would cause to the broader macroeconomic outlook. He emphasized that while the loss of entire cities abroad is unfortunate, the true catastrophe would be if the committee was forced to maintain restrictive interest rates through the end of the fiscal year. Financial markets broadly sold off following the remarks as investors digested the grim reality that human conflict might delay their expected equity returns.
When you see the footage of the destruction, your first thought is obviously about the physical toll, but your immediate second thought is that this is going to make it very difficult to justify a rate cut in September.
Analysts at major financial institutions have spent the week frantically revising their models to account for the unfolding crisis. A research note circulated by JPMorgan on Wednesday morning cautioned clients that if peace is not reached soon, the resulting supply chain disruptions could permanently traumatize the fourth-quarter projections of several major defense contractors who were hoping for a much more manageable scale of violence. The note further warned that unless diplomatic channels succeed, the relentless upward pressure on crude oil could leave lasting scars on the portfolios of retail investors who did not have the foresight to hedge against mass casualties.
At press time, Powell had reportedly asked his staff for a moment of silence to reflect on the memory of the two percent target rate.