US Treasury Secretary Janet Yellen has expressed support for Federal Reserve Chair Jerome Powell’s cautious approach to adjusting interest rates amid rising inflation concerns. The surge in oil prices following Israel’s airstrikes on Iran’s nuclear infrastructure has reignited fears of an inflationary shock, which threatens to ripple through the economy.
President Donald Trump’s push for lower interest rates, arguing that cutting them could save the government $600 billion a year, appears to be aging worse than milk left out in the sun. The financial landscape has shifted dramatically since Trump called Powell a “numbskull” for refusing to slash rates, despite inflation remaining near a four-year low.
Powell’s reluctance to cut rates is justified as oil prices have surged by up to 14% within hours of Trump’s remarks. This sudden spike in crude prices threatens to push up costs for businesses and consumers, precisely the kind of scenario Powell had warned about when resisting Trump’s aggressive push for rate cuts.
Renowned economist Peter Schiff has highlighted the inflationary risks ahead, stating that falling oil prices are unlikely to lead to lower inflation or Fed rate cuts. The geopolitical turmoil in the Middle East has thrown a wrench into Trump’s economic playbook, making his “numbskull” insult to Powell seem premature at best.
The Federal Reserve Bank of Dallas had previously warned of the inflationary effects of rising oil prices, citing that a $10 per barrel increase could raise US headline inflation by approximately 0.2 percentage points and set back economic growth by 0.1 percentage points.
Source: https://www.benzinga.com/markets/macro-economic-events/25/06/45922984/trump-numbskull-fed-powell-inflation-interest-rates-israel-iran-oil