#美伊局势影响 Former Federal Reserve Chair and former U.S. Treasury Secretary Yellen: Iran Situation Makes the Fed Less Willing to Cut Rates

Former Federal Reserve Chair and former U.S. Treasury Secretary Yellen recently stated that the impact of the Iran conflict on the oil market and how long it lasts will influence U.S. economic growth, while inflationary pressures will also increase. This will make the Fed's decision-making more complex:
I believe that recent developments in Iran have made the Federal Reserve more hesitant to cut rates, even more so than before the incident occurred. Currently, inflation remains about 1 percentage point above the Fed’s 2% target. President Trump’s tariff policies have contributed approximately 0.5 percentage points to the current roughly 3% inflation rate. Now, with the Iran shock, oil prices have surged significantly—what will happen in the coming days is still unclear. If the Strait of Hormuz remains closed for more than a few days—since this strait handles a large portion of regional oil shipments—oil prices could stay high or even rise further.
Before the Iran shock, the Fed believed it had already addressed the softening U.S. labor market and was waiting for inflation to fall back.

Given that the Fed has not yet brought inflation down to 2%, Yellen said: “They must worry that market participants are starting to think: yes, they brought inflation down to 3%, but they’re not really serious about bringing it down to 2%. If this psychological expectation takes hold, markets will worry that inflation will remain higher for a longer period, leading to worse policy trade-offs, which is also why the Fed might remain more on the sidelines.”
Despite significant risks, including the Iran conflict, Yellen stated: “Overall, the U.S. economy is quite healthy at the moment, and I am fairly optimistic about the economic outlook.”

Yellen also criticized some of the Trump administration’s actions against the Fed. She said it is almost unthinkable for the President to attempt to remove Board Member Lisa Cook. The Supreme Court has not yet issued an opinion, but Trump is likely to lose the case.
Yellen mentioned that the President “took unprecedented steps, essentially weaponizing the Department of Justice to target the Federal Reserve Chair.” This refers to the DOJ’s investigation into Fed Chair Powell’s comments last year about the cost overruns of the Fed building renovation. Yellen said that if criminal charges are brought, it would pose a huge threat to the independence of the Fed.
“I believe everyone recognizes that this would cause serious damage to economic policy and could significantly push up inflation.” Yellen also pointed out that many of President Trump’s policies that disrupted the global economy are reflected in investors demanding higher risk premiums on U.S. Treasuries. She said concerns about U.S. economic policy have intensified, also putting downward pressure on the dollar, as markets believe higher risks need to be compensated.