Fed’s Powell warns oil price surge not yet at its peak

Federal Reserve Chair Jerome Powell warned on Wednesday that the surge in energy prices has not yet reached its highest point, adding that a prolonged oil shock could magnify its effect on the global economy and complicate monetary policy decisions.

Split decision at the Fed

Speaking after the central bank held its benchmark rate steady in the 3.5%-3.75% range, Powell noted that the oil shock is already hitting Europe and Asia harder than the United States, but its consequences would become far more visible if disruptions continue for “much longer.” His remarks followed an unusually divided Federal Open Market Committee vote, with policymakers splitting 8-4 on the decision to hold rates. Powell said more officials now see a rate hike as just as likely as a rate cut, reflecting growing divisions over inflation risks from higher energy prices.

Powell to stay on amid legal battles

Powell also revealed that he now has “no choice” but to remain on the Fed board after his chair term ends in May, citing unprecedented legal actions taken by the Trump administration. “I had long planned to be retiring,” he said. “The things that have happened really in the last three months have, I think, left me no choice but to stay until I see them through.” He added that he will not leave the board until an ongoing investigation is “well and truly over with transparency and finality.” Powell rejected suggestions that he would act as a “shadow” chair after the leadership transition, saying he expects a “normal, standard” handover with nominee Kevin Warsh.

Focus on Fed independence

Powell emphasized that the central bank remains committed to preserving its independence and conducting policy without political considerations, criticizing recent legal actions against the Fed as unprecedented.