Powell sees inflation outlook in check, no wider crisis yet in private credit

Federal Reserve Chairman Jerome Powell said in a wide-ranging speech at Harvard University on Monday that he thinks inflation expectations are solid despite rising energy prices and no signs yet of a widespread crisis in private credit.

As his tenure at the central bank nears its end, Powell dodged questions about the long-term direction of interest rates or the trends his successor has adopted.

He said the right move in the near term is to look beyond short-term fluctuations in the energy market and focus on the Fed’s goals of stable prices and low unemployment.

“Inflation expectations seem to be firmly anchored beyond the short term, but it’s still something that we’re going to be faced with eventually the question of what do we do here,” he said during a Q&A with moderators and students. “We’re not confronting that yet because we don’t know what the economic impacts will be, but we will certainly take that broader context into account when making that decision.”

As in the past, Powell said he believes the current interest rate target in the 3.5 percent to 3.75 percent range is a “good place” for the Fed to monitor events currently ongoing, including the Iran war and the impact of tariffs on prices.

President Donald Trump has nominated former Governor Kevin Warsh to be the next president.

Warsh stated that he would prefer interest rates to be lower than the current level. When asked to comment on his successor’s plans, Powell said, “I’m not going to swing on this field.”

On private loans, Powell noted concerns about rising defaults, investor pullbacks and broader problems in the $3 trillion industry.

“I’m reluctant to say anything that suggests we’re ignoring the risk, but we’re looking for connections to the banking system and things that could lead to contamination. We’re not seeing those right now,” he said. “What we’re seeing is a correction going on, and there will certainly be people losing money and things like that. But it doesn’t look like it’s going to turn into a broader systemic event.”

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