Fed officials warn persistent inflation may keep rates high or rising
Updated
Updated · Reuters · May 6
Fed officials warn persistent inflation may keep rates high or rising
10 articles · Updated · Reuters · May 6
Chicago Fed's Austan Goolsbee and St Louis Fed's Alberto Musalem said the Iran war, oil above $100 and worsening supply chains are raising inflation risks.
Musalem said policy may need to stay on hold for some time and could even tighten, while Goolsbee said the shock has been inflationary rather than stagflationary so far.
US gasoline has climbed above $4.50 a gallon, supply-chain pressure is at its highest since July 2022, and March PCE inflation rose to 3.5%, complicating expected rate cuts.
Beyond oil, what critical shortages from the Iran war could shock the global economy next?
Is the world facing an energy crisis worse than the 1970s oil shocks?
Can the Fed tame war-fueled inflation without triggering a recession?
Federal Reserve Holds Rates at 3.5%-3.75% with Record Dissent as Iran Conflict Fuels Inflation
Overview
In April 2026, the Federal Reserve held interest rates steady at 3.5% to 3.75% for the third meeting in a row, amid deep internal divisions marked by four dissenting officials concerned that this stance risks entrenching persistent inflation. This cautious 'wait-and-see' approach reflects challenges from a severe inflationary shock caused by the prolonged closure of the Strait of Hormuz due to the Iran conflict, which drastically reduced global oil supplies and pushed energy prices higher. The combined effect of high rates and the energy crisis has created a stagflation scare, weakening economic growth, slowing hiring, and dampening housing and business investment. Meanwhile, Jerome Powell’s unusual decision to remain on the Fed Board amid an ongoing investigation adds political tension, complicating the leadership transition and the Fed’s path forward.