Yellen: one cut possible — warning
Janet Yellen said a Federal Reserve rate cut this year remains possible but warned that supply shocks from the Iran war make cuts harder to deliver. She also criticised political pressure on monetary policy, likening President Trump’s push for lower rates to the behaviour of a 'banana republic', and other Fed officials have urged patience amid the uncertainty. (reuters.com) (theguardian.com) (thestreet.com)
Janet Yellen said on April 15 that the Federal Reserve could still cut interest rates once this year, even as the Iran war makes that harder. (usnews.com) Speaking at the HSBC Global Investment Summit in Hong Kong, Yellen said the war is creating supply shocks that add to inflation pressure. She said the Federal Reserve still has to judge whether that shock fades or spreads through the wider economy. (usnews.com) A supply shock is when a war, embargo, or disaster makes key goods scarcer and more expensive. In this case, higher energy costs can lift prices across transport, manufacturing, and household bills even before the Federal Reserve changes rates. (cnbc.com) Yellen also attacked President Donald Trump’s public demands for lower rates, saying politicians who push central banks to cut borrowing costs to ease government debt service risk stoking inflation. The Guardian reported that she compared that approach to the behavior of a “banana republic.” (theguardian.com) The Federal Reserve is trying to keep inflation near 2 percent while also supporting employment. When oil or shipping costs jump because of war, cutting rates can boost demand at the same time prices are already rising. (federalreserve.gov; cnbc.com) Other policymakers are signaling the same caution. The Federal Reserve’s Beige Book, released April 15, said the conflict in the Middle East was a “major source of uncertainty” that complicated hiring, pricing, and investment decisions, with many firms taking a wait-and-see posture. (federalreserve.gov) The next Federal Open Market Committee meeting is scheduled for April 28 and 29, according to the Federal Reserve’s calendar. Investors broadly expect officials to leave rates unchanged while they watch how the war and earlier tariff shocks feed into inflation and growth. (federalreserve.gov; investopedia.com) That leaves Yellen’s message in a narrow lane: one cut is still possible, but only if the inflation hit from war-driven supply shocks does not deepen. Her warning was that political pressure will not make that trade-off easier for the central bank. (usatoday.com; theguardian.com)
