• Federal Reserve Chair Jerome Powell says the initial economic impact of rising oil prices is more pronounced in Europe and Asia than in the United States.
  • Powell cautioned that if elevated oil prices persist, the U.S. will feel the pain much more acutely.
  • The remarks come as crude benchmarks hover near multi-month highs amid geopolitical tensions.

Powell on Oil's Asymmetric Impact

Federal Reserve Chair Jerome Powell acknowledged Thursday that the recent surge in oil prices is weighing more heavily on Europe and Asia than on the United States—for now. Speaking at a press conference following the Fed's latest policy decision, Powell stressed that the U.S. is comparatively insulated due to its status as a net energy producer and its diversified economy. “The effects on the U.S. are less than on Europe and Asia,” Powell said, according to people familiar with his remarks.

But he added a stark caveat: “If this goes on for much longer, we will feel it much more.” The warning underscores the Fed's concern that prolonged energy inflation could eventually seep into broader price measures, complicating the central bank's fight against inflation.

Lingering Risks

While U.S. gasoline prices have risen, household spending has remained resilient. However, businesses in energy-intensive sectors—such as manufacturing and transportation—are beginning to report margin pressure. One senior administration official, speaking on condition of anonymity, said the White House is “closely monitoring” the situation and weighing strategic reserve releases if necessary.

European policymakers have been more vocal about the strain, with the ECB noting that the region's reliance on imported oil makes it especially vulnerable. Meanwhile, Asian importers like Japan and India have seen their import bills swell.

Market Reaction

Oil prices edged higher after Powell's comments, with Brent crude trading near $92 a barrel. The U.S. dollar strengthened against a basket of currencies, reflecting expectations that the Fed will maintain a tighter policy stance longer than its peers.

Correction: An earlier version of this article misstated the timing of Powell's remarks. They were made at the September 18 press conference, not the September 17 one.