00:00 Josh
Jerome Powell said the Federal Reserve has the ability to handle energy price shocks caused by the Iran war. The Fed chairman spoke earlier at Harvard University as investors assessed whether the central bank needed to raise interest rates. Polymarket currently has a 21% chance of raising interest rates this year. Yahoo Finance's Jennifer Schonberger has been following the latest developments. Jane.
00:30 Jennifer Schoenberg
Hey Josh. Yes, we heard from Fed Chairman Powell on conflicts in the Middle East, private credit, interest rates and more. He said this morning there was currently no risk in private credit markets that could spread to the wider financial system, although he said the central bank was keeping a close eye on the issue. Listen.
01:05 Jerome Powell
We're looking for links to the banking system and things that could lead to contagion. We don't see that now. What we're seeing is uh uh, you know, there's a correction going on and uh, of course there's going to be people losing money and things like that, but it doesn't seem to have the makings of a broader systemic event.
01:31 Jennifer Schoenberg
The chairman of the Federal Reserve reiterated that interest rates are in a good quote position, which means that the central bank is currently willing to keep interest rates stable in the face of conflicts in the Middle East. Although Chairman Powell interestingly said that the central bank has developed a protocol to look at supply-side shocks, such as the oil price shocks we are seeing now from the Middle East. However, they now need to consider the fact that inflation has remained above the Fed's 2% target for five years. Although inflation expectations remain at 2%, if this changes, the central bank will need to take action and consider it. Now, we also hear from New York Fed President John Williams speaking in New York, and he also talks about the conflict in the Middle East and its impact on the economy and inflation. He expects headline inflation to rise in the coming months, but we may see a partial reversal of that as hostilities cease, which in part means the conflict may not be as long-lasting. However, Williams also warned that the conflict could lead not only to higher inflation but also to slower economic growth. This kind of paints the picture of a stagflation-like scenario. Nonetheless, William's base forecast is that he expects GDP to grow strongly at 2.5 percent this year. That's thanks to what he called good financial conditions, investment in artificial intelligence, and fiscal policy tailwinds, namely the huge tax refunds we're seeing, which are 10% higher on average than last year. Williams expects inflation to be around 2% to 3/4% this year. Part of the reason is tariffs. Both he and Powell believe the current contribution from tariffs to inflation ranges from half a percentage point to a full percentage point. Uh, that's the Fed roundup this afternoon. Josh.
02:59 Josh
Okay, thank you, Jen. To learn more about Polymarket odds, you can scan the QR code on the screen. This will take you to the Yahoo Finance Prediction Markets Center powered by Polymarket.