Fed Governor Milan: Policy Should Not Be Based on Short-Term Conflict Factors

Federal Reserve Governor Milan stated that the central bank should not formulate policies based on short-term factors related to conflicts involving the United States and Israel in Iran. According to Jin10, Milan emphasized the importance of gathering all relevant information before altering their perspective. He noted that it is premature to have a clear understanding of the situation over the next 12 months. The conflict in the Middle East has led to a significant rise in oil prices, which could exert upward pressure on inflation and negatively impact economic growth and the labor market. Last week, the Federal Reserve decided to keep the benchmark interest rate unchanged for the second consecutive time. Policymakers acknowledged the increased economic uncertainty due to the escalating war situation, and Fed Chair Powell highlighted the need for more progress in reducing inflation. Milan opposed this decision, favoring a 25 basis point rate cut. However, he conceded that if oil prices remain high, they could gradually affect other goods and services. Despite this, Milan maintained his pre-war expectation of four rate cuts this year.