• Federal Reserve Chair Jerome Powell said he is "very aware" that Americans are feeling the pinch from higher gas prices, acknowledging a key source of consumer frustration.
  • Powell stopped short of signaling any imminent policy shift, reiterating the Fed's data-dependent stance and noting that energy-driven inflation may prove transitory.
  • The remarks come as the national average for regular gasoline hovers near $3.60 per gallon, up roughly 15% from a year ago, according to AAA data.

Federal Reserve Chair Jerome Powell acknowledged on Wednesday that the central bank is "very aware" that higher gas prices are squeezing American households, wading into a politically sensitive issue as the November election approaches.

"We see the data; we hear from people across the country," Powell said during a moderated conversation at the Harvard Kennedy School. "Gas prices are something that affects everyone's daily life, and we are very focused on that."

The comments mark a rare public recognition by Powell of a specific pocket of inflation that has become a lightning rod for critics of the Biden administration's energy policies. The national average for a gallon of regular gasoline stood at $3.62 on Wednesday, up from $3.15 a year ago and $3.02 at the start of 2024, according to AAA.

Powell attributed the rise largely to supply-side factors, including refinery outages and geopolitical tensions, rather than strong demand. "What we're seeing is primarily a supply shock in the refining sector, not a broad-based increase in demand," he said. "That has implications for how we think about the persistence of this price pressure."

The Fed chair's remarks come as central bank officials grapple with an inflation picture that has proven stubbornly sticky. The personal consumption expenditures price index, the Fed's preferred gauge, rose 2.7% in April from a year earlier, still above the 2% target. Gasoline prices alone contributed roughly 0.2 percentage point to that reading.

"Energy costs are a wildcard" for the inflation outlook, said Ellen Zentner, chief economist at Morgan Stanley, in a note to clients. "But the Fed is unlikely to overreact to a single volatile component, especially if it's supply-driven."

Powell echoed that sentiment, emphasizing that the Fed would remain data-dependent and would not preemptively tighten policy in response to transitory energy shocks. "We are prepared to maintain the current stance as long as needed," he said. "If we see that inflation is not moving sustainably toward 2%, then we could hold rates higher for longer."

The acknowledgment of consumer pain over gas prices also carries political overtones. Former President Donald Trump has hammered President Joe Biden over rising costs at the pump, and a recent poll by The Associated Press-NORC Center for Public Affairs Research found that 62% of Americans disapprove of Biden's handling of inflation.

Asked whether the Fed's independence could be threatened by election-year pressures, Powell demurred. "We focus on our mandate, full stop," he said. "We don't take political considerations into account."

The White House has taken steps to mitigate gas prices, including releasing 1 million barrels of gasoline from the Northeast reserve ahead of the summer driving season. But analysts say such moves are unlikely to have a lasting impact.

"Strategic releases are a Band-Aid, not a cure," said Bob Yawger, director of energy futures at Mizuho Securities. "The real issue is refinery capacity, which takes years to address."

Powell's remarks did little to move markets, with the S&P 500 slipping 0.1% and the yield on the 10-year Treasury note edging down to 4.28%. Traders continued to price in a roughly 60% chance of a rate cut by September, according to the CME FedWatch Tool.

Some economists cautioned against reading too much into Powell's comments. "He was empathizing, not signaling," said Diane Swonk, chief economist at KPMG. "The Fed is still in a wait-and-see mode, and gas prices alone won't change that."

Powell is scheduled to testify before the House Financial Services Committee next week, where lawmakers are expected to press him on inflation and the economic outlook.

Correction: An earlier version of this article misstated the date of Powell's remarks. They were made on Wednesday, not Thursday.