Three senior Federal Reserve officials jointly stated that core inflation may be close to 3%, and interest rates are likely to remain unchanged.
2026-04-16 10:53:11
Several regional Federal Reserve presidents have recently shared their views on the current economic situation and monetary policy outlook. They generally believe that the sharp rise in oil prices triggered by the Middle East wars is putting significant pressure on the US inflation outlook, and core inflation may approach or reach 3% this year, far higher than the Fed's long-term target of 2%. Therefore, the Fed is likely to need to maintain the current interest rate level for some time.
St. Louis Federal Reserve President Alberto Musalem said on Wednesday (April 15) that high oil prices could continue to push core inflation up for the remainder of the year, nearly one percentage point above the Fed's 2% target. Therefore, the Fed may need to maintain its policy rate target range at the current 3.50%-3.75% for some time.
Mussalem noted, "Oil prices are likely to pass through to some extent into core inflation." He expects this key measure of price increases to be "slightly below 3%, probably around 3%" by the end of the year, while there is a risk that inflation will rise further.
He added that the Federal Reserve is likely to keep interest rates at current levels "for some time" and will closely monitor changes in inflation, employment, and economic data in the coming months. He said this view was shared by many of his colleagues.
Although the Federal Reserve had previously planned to cut interest rates this year, the outbreak of the Middle East war and the ensuing surge in oil prices have completely altered the policy outlook. Currently, investors widely expect the Fed to extend the pause in rate cuts while continuing to monitor the impact of the conflict.
Chicago Federal Reserve President Austan Goolsbee said on Tuesday that rising oil prices could lead to a significant increase in consumer inflation expectations. He noted that rising oil prices pose a "double threat" at a time when tariff-induced inflation has not yet fully subsided.
Goolsby stated, "If oil prices remain high, we could see a significant rise in consumer inflation expectations, which, combined with tariff inflation that has not yet subsided, would pose a double threat."
Cleveland Federal Reserve President Beth Hammack said on Wednesday that she currently does not believe there is an urgent need for the Fed to adjust its interest rate target, but that both rate cuts and rate hikes are possible in the future.
Hamak noted, "I think the current interest rate level is appropriate. My baseline assessment is that we will keep interest rates unchanged for quite some time, but I do think there are two-way risks to interest rates." She added, "Depending on how the data performs, we may need to take a more accommodative or more restrictive stance."
Hamak emphasized that the current phase is extremely challenging for the Federal Reserve because the latest energy price shock triggered by the Middle East wars is occurring against a backdrop of persistently high inflation, making interest rate policy decisions more complex. She stated that the key question is "how high will energy prices rise, and how long will they remain high?"
She further pointed out that high energy prices may be "more inflationary," but if they begin to affect consumer spending, this could manifest in economic growth and employment data. She believes that while the Federal Reserve can often treat supply shocks as temporary events and "ignore" them, the current shock may be different.
Hamak stated, "A series of successive supply shocks makes it difficult to determine what policy action the Fed should take. When all this is happening against a backdrop of already high inflation, its nature may differ from when we entered this phase in a low and stable inflation environment." She emphasized, "Now is a good time to remain patient and observe how the data evolves."
Several Federal Reserve officials have noted that the current inflation situation remains concerning. The Fed sets a 2% inflation target using the PCE (Patent Price Index) as its benchmark. As of February, the index's annual growth rate was 2.8%, while the core PCE, excluding volatile items such as energy, reached 3% in February and is expected to rise further to 3.2% in March.
Mussalem stated that while the lingering effects of last year's tariff increases may gradually subside this quarter, and house price inflation is also weakening, oil prices are rising in the opposite direction, and inflation rates across various services remain high. He would be open to raising interest rates if inflation begins to rise and potentially boost inflation expectations.
Hamak also pointed out that inflation remaining above the 2% target for an extended period has had a significant impact on the economy. She said, "For the past five years, we have consistently been above the 2% target level. During this period, individuals have actually experienced the equivalent of a decade's worth of inflation shocks."
Regarding the labor market, officials believe it is currently in a relatively balanced state, with wage competition remaining moderate and not yet putting additional pressure on inflation. However, they also warned that the oil market has experienced its third negative supply shock in the past 12 months, and coupled with rising tariffs and tightening immigration policies, this not only risks the inflation outlook but could also threaten economic growth and the job market.
Statements from the three regional Federal Reserve presidents indicate that, against the backdrop of Middle East wars driving up oil prices, the Fed's concerns about inflation have clearly increased. The assessment that core inflation may approach 3% this year makes it highly likely that the Fed will maintain the current interest rate range of 3.50%-3.75% in the short term.
Future policy direction will remain highly dependent on inflation data, the employment situation, and further developments in the Middle East. Federal Reserve policymakers are currently generally choosing to remain patient and closely monitor data developments to address the two-way risks between inflation and growth.
Mussalum: Oil price transmission will push up core inflation; interest rates should remain unchanged.
St. Louis Federal Reserve President Alberto Musalem said on Wednesday (April 15) that high oil prices could continue to push core inflation up for the remainder of the year, nearly one percentage point above the Fed's 2% target. Therefore, the Fed may need to maintain its policy rate target range at the current 3.50%-3.75% for some time.
Mussalem noted, "Oil prices are likely to pass through to some extent into core inflation." He expects this key measure of price increases to be "slightly below 3%, probably around 3%" by the end of the year, while there is a risk that inflation will rise further.
He added that the Federal Reserve is likely to keep interest rates at current levels "for some time" and will closely monitor changes in inflation, employment, and economic data in the coming months. He said this view was shared by many of his colleagues.
Although the Federal Reserve had previously planned to cut interest rates this year, the outbreak of the Middle East war and the ensuing surge in oil prices have completely altered the policy outlook. Currently, investors widely expect the Fed to extend the pause in rate cuts while continuing to monitor the impact of the conflict.
Goolsby: Rising oil prices could boost consumer inflation expectations, creating a double threat.
Chicago Federal Reserve President Austan Goolsbee said on Tuesday that rising oil prices could lead to a significant increase in consumer inflation expectations. He noted that rising oil prices pose a "double threat" at a time when tariff-induced inflation has not yet fully subsided.
Goolsby stated, "If oil prices remain high, we could see a significant rise in consumer inflation expectations, which, combined with tariff inflation that has not yet subsided, would pose a double threat."
Hamak: Interest rates face two-way risks; no rush to adjust in the short term.
Cleveland Federal Reserve President Beth Hammack said on Wednesday that she currently does not believe there is an urgent need for the Fed to adjust its interest rate target, but that both rate cuts and rate hikes are possible in the future.
Hamak noted, "I think the current interest rate level is appropriate. My baseline assessment is that we will keep interest rates unchanged for quite some time, but I do think there are two-way risks to interest rates." She added, "Depending on how the data performs, we may need to take a more accommodative or more restrictive stance."
Hamak emphasized that the current phase is extremely challenging for the Federal Reserve because the latest energy price shock triggered by the Middle East wars is occurring against a backdrop of persistently high inflation, making interest rate policy decisions more complex. She stated that the key question is "how high will energy prices rise, and how long will they remain high?"
She further pointed out that high energy prices may be "more inflationary," but if they begin to affect consumer spending, this could manifest in economic growth and employment data. She believes that while the Federal Reserve can often treat supply shocks as temporary events and "ignore" them, the current shock may be different.
Hamak stated, "A series of successive supply shocks makes it difficult to determine what policy action the Fed should take. When all this is happening against a backdrop of already high inflation, its nature may differ from when we entered this phase in a low and stable inflation environment." She emphasized, "Now is a good time to remain patient and observe how the data evolves."
Inflation and Overall Labor Market Assessment
Several Federal Reserve officials have noted that the current inflation situation remains concerning. The Fed sets a 2% inflation target using the PCE (Patent Price Index) as its benchmark. As of February, the index's annual growth rate was 2.8%, while the core PCE, excluding volatile items such as energy, reached 3% in February and is expected to rise further to 3.2% in March.
Mussalem stated that while the lingering effects of last year's tariff increases may gradually subside this quarter, and house price inflation is also weakening, oil prices are rising in the opposite direction, and inflation rates across various services remain high. He would be open to raising interest rates if inflation begins to rise and potentially boost inflation expectations.
Hamak also pointed out that inflation remaining above the 2% target for an extended period has had a significant impact on the economy. She said, "For the past five years, we have consistently been above the 2% target level. During this period, individuals have actually experienced the equivalent of a decade's worth of inflation shocks."
Regarding the labor market, officials believe it is currently in a relatively balanced state, with wage competition remaining moderate and not yet putting additional pressure on inflation. However, they also warned that the oil market has experienced its third negative supply shock in the past 12 months, and coupled with rising tariffs and tightening immigration policies, this not only risks the inflation outlook but could also threaten economic growth and the job market.
Overall Assessment
Statements from the three regional Federal Reserve presidents indicate that, against the backdrop of Middle East wars driving up oil prices, the Fed's concerns about inflation have clearly increased. The assessment that core inflation may approach 3% this year makes it highly likely that the Fed will maintain the current interest rate range of 3.50%-3.75% in the short term.
Future policy direction will remain highly dependent on inflation data, the employment situation, and further developments in the Middle East. Federal Reserve policymakers are currently generally choosing to remain patient and closely monitor data developments to address the two-way risks between inflation and growth.
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