Powell faces inflation-growth dilemma at Harvard

Jerome Powell is set to speak at Harvard University on Monday, as the Federal Reserve confronts a growing economic dilemma: how to respond to rising inflation without harming economic growth.

The challenge comes as the ongoing conflict involving Iran pushes energy prices higher, with U.S. gasoline nearing $4 per gallon—adding fresh pressure on inflation, News.Az reports, citing Reuters.

Central banks typically face a trade-off in such situations. Raising interest rates can help control inflation but risks slowing the economy and weakening the labor market. Keeping rates steady—or cutting them—may support growth but allow inflation to rise further.

“The Fed is truly in a position where either choice carries risks,” analysts say.

Financial markets have already begun adjusting to the uncertainty. Investors who previously expected interest rate cuts are now pricing in a growing chance of a rate hike by the end of the year, as inflation concerns intensify.

Recent data also shows rising inflation expectations among households, although some market-based indicators remain more stable.

Higher oil and energy costs linked to geopolitical tensions are adding to the Fed’s concerns. Economists warn that sustained price increases could feed into broader inflation trends, affecting both consumer behavior and business decisions.

At the same time, Fed officials note that the current policy stance remains broadly neutral, giving policymakers flexibility to wait for clearer economic signals.

Powell’s speech is expected to provide clues about how the Fed may balance these competing risks—whether it leans toward tightening policy to curb inflation or prioritizes economic stability in the face of potential slowdown.

News.Az 

By Aysel Mammadzada