Federal Reserve Chairman Jerome Powell holds a press conference on the 18th (local time) [AP=Yonhap News]

Jerome Powell, the chairman of the U.S. Federal Reserve (Fed), expressed concern on the 18th (local time) that rising oil prices due to the war between the U.S., Israel, and Iran could exacerbate inflationary pressures and hinder U.S. economic growth.

Speaking at a press conference after the Federal Open Market Committee (FOMC) decided to keep the benchmark interest rate unchanged at 3.50-3.75%, Powell stated, "Over the past five years, we have experienced the shock of tariffs and the (COVID-19) pandemic, and now we are facing an energy shock of significant magnitude and duration."

He added, "We do not know what the actual impact of that shock will be. We are concerned that this situation could negatively affect inflation expectations and cause problems."

Powell indicated that it could be difficult to decide on an interest rate cut due to the need to balance the labor market situation with inflation risks.

He explained, "We have a situation where downward pressure on inflation risks suggests a rate cut is needed, and upward pressure on inflation risks suggests a rate hike or a situation where we are balancing these two objectives. So, it is a difficult situation."

He also said, "We expect inflation to moderate to some extent, but perhaps not as much as we had hoped. We will see this from the middle of the year onwards as tariff-related progress begins to emerge."

Powell further stated, "The path of interest rates is dependent on how the economy performs. If the economy does not progress, there will be no rate cuts."

Regarding oil prices due to the war with Iran, he noted that there is uncertainty and assessed that the impact on the U.S. economy is uncertain.

Powell commented on the Middle East situation, saying, "In the short term, higher energy prices will push up overall inflation, but it is still too early to determine the scope and duration of the potential impact on the economy."

He emphasized, "The U.S. economy is performing quite well, but no one knows what impact this (the war) will have."

Powell also addressed concerns about stagflation, stating, "It is not appropriate to characterize the current situation as stagflation," and assessed that it is distinctly different from the 1970s.

He explained, "The term 'stagflation' was used in the 1970s when unemployment reached double digits and inflation was also very high. Currently, unemployment is very close to its long-term normal level, and inflation is only about one percentage point above its normal level."

He suggested, "I would like to reserve the term stagflation for more serious and grave situations."

In addition, Powell indicated that he could temporarily remain as chairman beyond May 15th if a successor is not appointed by the expiration of his term on that date.

He said, "That is what the law requires. It has happened multiple times, including myself."

Furthermore, he stated that he would not resign from his position as a Fed governor while the Justice Department's investigation into allegations of "excessive spending on Federal Reserve building renovations" is ongoing. He clarified, "I have no intention of stepping down from the board until the investigation is concluded transparently and definitively."

Powell's term as a Fed governor runs until the end of January 2028.