STEVE INSKEEP, HOST:
President Trump's response to strikes on energy facilities reveals just how sensitive they are. Israel bombed a massive natural gas facility in southern Iran. Iran replied by blasting facilities on the other side of the Persian Gulf in Qatar. Afterward, President Trump said he had nothing to do with all this and that Israel would not do it again. There is widespread concern about further energy shocks that affect the whole world, including the U.S. economy. On the very day of those strikes, the Federal Reserve was trying to judge where the economy is going and how they should try to guide it. They decided to leave interest rates unchanged. NPR's Scott Horsley reports.
SCOTT HORSLEY, BYLINE: The war and the disruption it's caused to oil tanker traffic in the Strait of Hormuz have already triggered a sharp spike in the price of gasoline and diesel fuel. The increase in diesel prices could have ripple effects on the cost of lots of goods that get trucked around the country. But Fed Chairman Jerome Powell says the overall effect on inflation remains uncertain.
(SOUNDBITE OF ARCHIVED RECORDING)
JEROME POWELL: We're right at the beginning of this, and we don't know how big this will be and how long it lasts. You know, it may or may not be something that really makes a big imprint on the U.S. economy.
HORSLEY: Fed policymakers are projecting slightly higher inflation at year's end now than they were three months ago, but Powell acknowledged that's just a guess. The central bank is also in wait-and-see mode about when it will get a new chairman. Powell's term as chair officially expires in May, but he plans to stay on if no replacement's been confirmed by then. President Trump has nominated former fed governor Kevin Warsh to take over as chairman, but a key GOP senator is blocking Warsh's confirmation until the Justice Department ends its investigation of the Fed. Last week, a federal judge put the brakes on that probe, saying it was part of an improper campaign by the president to pressure the central bank into cutting interest rates. Powell promised to stick around until the investigation is resolved and maybe longer.
(SOUNDBITE OF ARCHIVED RECORDING)
POWELL: On the question of whether I will then continue to serve as a governor after my term ends and after the investigation is over, I have not made that decision yet. And I will make that decision based on what I think is best for the institution and for the people we serve.
HORSLEY: Fed chairs typically step down from the Fed's governing board once they're no longer at the head of the table, but by keeping his seat through early 2028, Powell could deny Trump an opening to install a board member who's less committed to an independent central bank and more likely to do the president's bidding.
Scott Horsley, NPR News, Washington. Transcript provided by NPR, Copyright NPR.
NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.
