CAMBRIDGE, Mass. – Federal Reserve Chair Jerome Powell emphasized the necessity of closely monitoring inflation in light of rising energy prices, which have been influenced by ongoing geopolitical tensions, particularly the war in Iran. Speaking to an audience of nearly 400 students at Harvard University, Powell highlighted that the average gas prices in the U.S. are nearing $4 per gallon, sparking concerns about the broader economic implications.
Despite acknowledging the challenges posed by energy price fluctuations, Powell noted that the Federal Reserve has limited tools at its disposal to address these short-term shocks. He remarked that energy disruptions typically have transient effects, and the Fed’s monetary policies are designed to influence the economy over a longer horizon. Nonetheless, he cautioned that a series of significant supply shocks could alter inflation expectations among the public, businesses, and households, potentially leading to sustained higher inflation.
In his address, Powell also addressed the challenges facing young graduates entering a competitive job market, particularly in the context of emerging technologies such as artificial intelligence (AI). Although the unemployment rate remains historically low, he pointed out that job creation has stagnated, with employers adding fewer than 10,000 jobs per month in 2025, marking the weakest hiring rate outside a recession since 2002. This trend was punctuated by a precarious start to the year, which saw a strong job gain in January followed by notable job losses in February.
Economists have characterized the current job market as low-hire, low-fire, where companies are reluctant to both expand their workforce and part with existing employees. This dynamic has created significant barriers for younger job seekers, with concerns that AI may be displacing entry-level positions traditionally held by this demographic. Powell acknowledged that companies are likely hesitant to make new hiring decisions until they fully understand how to integrate AI into their operations.
Looking ahead, Powell expressed a cautiously optimistic outlook for the economy, noting that history illustrates how technological advancements can enhance living standards and productivity. He encouraged graduates to invest time in mastering new technologies, suggesting that while the current labor market is challenging, long-term opportunities will emerge.
During a question-and-answer segment, Powell maintained a focus on the Federal Reserve’s independence, subtly addressing criticisms from former President Donald Trump, who has consistently urged the Fed to lower interest rates to stimulate economic growth. Powell reiterated the importance of adhering to the Fed’s dual mandate of maintaining price stability and maximizing employment.
Recent economic policies, particularly those enacted during the Trump administration, have complicated the Fed’s mission. New tariffs imposed on trading partners have contributed to rising retail prices, while the ongoing conflict in Iran has exacerbated energy price inflation. As of the report, the average price for a gallon of gas in the U.S. stood at $3.99, according to the American Automobile Association (AAA).
Powell’s remarks also touched on the political pressures facing the Federal Reserve, especially in light of Trump’s recent attempts to influence the central bank’s leadership. Trump has nominated former Fed official Kevin Warsh to succeed Powell, but Warsh’s confirmation is currently stalled due to a Justice Department investigation. In this context, Powell advised his potential successor to focus on the Fed’s core responsibilities and remain steadfast against political influences.
“We have very powerful tools. They’re supposed to be for maximum employment and price stability and financial stability,” Powell concluded. “It’s crucial to stick to what we’re doing without being swayed by political agendas.”
