CAMBRIDGE, Mass. (AP) – Federal Reserve Chairman Jerome Powell said Monday that it is important to carefully watch inflation during the rise in energy prices since the Iran war.
Watch Powell’s comments in full in the video player above.
Powell, who spoke in front of about 400 students at Harvard University when gas prices averaged $4 per gallon in the US, said there was not much Fed policymakers could do as energy shocks “tend to come and go quickly” and monetary policies are long-term. But a series of earthquakes, however, can affect.
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“You have to watch inflation expectations very carefully because you can have a series of big supply shocks and that can lead, you know, the general public, businesses, price setters, households … to start expecting higher inflation over time. Why wouldn’t that be the case?” Powell said.
In separate remarks, Powell acknowledged that young graduates were entering a tough job market. He noted the role of artificial intelligence and that while employment is historically low, job creation is very limited now.
The US job market was weak last year. Employers have added fewer than 10,000 jobs per month in 2025 – the slowest hiring outside of a recession since 2002. The year started with a strong 126,000 new jobs in January, but the United States posted a 92,000 job loss the following month.
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Economists refer to a low-wage, inefficient labor market where companies are reluctant to add workers but unwilling to let go of existing workers. That makes it difficult especially for young people to find a job. There is concern that artificial intelligence is taking over jobs that previously would have gone to young job seekers, or that companies are reluctant to make hiring decisions until they better understand how they will use AI.
Powell said he was optimistic about the long-term, noting that history has shown that technology has consistently raised living standards and increased productivity. He said that examples of great speeches make people, including him, more successful.
“You’re at a point where you need to invest the time to use these new technologies,” Powell said. “There is no denying that it is a difficult time to enter the labor market. It may take patience and all, but in the long run, this economy will give you great opportunities. Just have a little hope.”
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In the question-and-answer session, neither Powell nor the students mentioned President Donald Trump, who has repeatedly criticized the Fed chairman. But Powell emphasized the importance of Fed independence.
“It’s very hard to build great democratic institutions and very easy to take them down,” Powell said.
President Donald Trump has repeatedly urged Powell and the Fed to cut interest rates, which would reduce the cost of borrowing for households, businesses and the US government. Powell’s warning angered Trump.
Some of the economic policies under the Trump administration, however, have complicated the two mandates of the Federal Reserve, which is to keep prices stable and demand more work.
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The US has hit all of its trading partners with new tariffs that could increase retail prices, and the war in Iran has sent energy prices soaring.
The average gallon of gas in America has risen to $3.99 overnight, according to the automobile group AAA.
Trump stepped up his attacks on the Fed in January, when the Justice Department served the central bank with subpoenas and threatened it with criminal charges over his testimony last summer about the renovation of the Fed building.
Trump has nominated former Fed official Kevin Warsh to succeed Powell. But Warsh’s confirmation has been delayed by a Justice Department investigation. Sen. Thom Tillis, Republican of North Carolina, said he will not vote to confirm any Fed nominees until the investigation is cleared.
However, Powell took a moment to offer advice to his would-be successor without naming him, saying “it’s very important to stick to your knitting and stick to the things that are actually assigned.”
“We have very strong resources. They should be of high performance and price stability and financial stability,” he continued. “There’s always a time when the system looks and says it would be better to use that tool for something else… We just have to be in a position where we’re not trying to work against any politician or any system, but we have to be careful to stick to what we’re doing.”
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