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Investing.com-- Former Federal Reserve Chair and U.S. Treasury Secretary Janet Yellen sees one interest rate cut by the central bank as possible this year, despite potential inflationary shocks from war in the Middle East.
“If I’m going into the next FOMC meeting where the forecasts are produced… my guess would be that maybe there would be a cut later in the year,” Yellen said at the HSBC Global Investment Summit in Hong Kong on Wednesday, according to comments carried by Reuters.
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She noted that short-term inflation expectations were up, but said that the central bank would keep an open mind on inflationary shocks.
Still, she also noted that the Middle East conflict put upward pressure on inflation, and that economic uncertainty had risen sharply in its wake.
“We’re likely to see more (inflation)... this is a really broad supply shock,” Yellen said.
The Fed left interest rates unchanged between 3.50% and 3.75% in March and flagged caution over the inflationary effects of the U.S.-Israel war on Iran. But a majority of policymakers forecast at least one potential interest rate cut this year.
The Iran war entered its sixth week by mid-April, with energy market disruptions from the conflict showing few signs of abating. Oil prices had surged on the conflict, with U.S. consumer price index inflation data for March showing a sharp energy-fueled increase in inflation.