Fed chair signaled patience on rates even as energy costs surge
Federal Reserve chair Jerome Powell used a wide‑ranging appearance at Harvard University to calm fears that the latest oil shock would trigger another round of interest rate hikes. His message to markets and Main Street alike: focus on inflation expectations and the jobs picture, not every twist in energy prices.
For mortgage professionals, the remarks landed after weeks of war‑driven volatility. Average 30‑year fixed mortgage rates already climbed for 6.38% as of March 26, according to Freddie Mac. Mortgage industry executives noted that is the highest 30‑year average since early September, when rates last peaked above 6.5%.
Moreover, the 10‑year Treasury yield slipped to around 4.36% in early Monday trading, with the 30‑year at roughly 4.92% and the 2‑year closer to 3.86%.
“Inflation expectations do appear to be well anchored beyond the short term, but nonetheless, it’s something we will eventually maybe face the question of what to do here,” Powell said during a question‑and‑answer session with a moderator and students.
“We’re not really facing it yet, because we don’t know what the economic effects will be, but we’ll certainly be mindful of that broader context when we make that decision.”
“The tendency is to look through any kind of a supply shock,” Powell said.
“Monetary policy works with long and variable lags, famously, and so, by the time the effects of a tightening in monetary policy take effect, the oil price shock is probably long gone, and you’re weighing on the economy at a time when it’s not appropriate.”
Rising oil prices and the Iran conflict push OECD US inflation forecasts to 4.2% in 2026. Fed policy uncertainty could keep long-term rates high, affecting mortgage demand even as buyers regain leverage in housing.https://t.co/sOFVXPoZXc
— Mortgage Professional America Magazine (@MPAMagazineUS) March 26, 2026
He added that the current federal funds rate target, in a range between 3.5%–3.75%, was “a good place” for the Fed to sit as it watches how the Iran war, higher energy prices and tariffs filtered into the broader economy, rather than reacting pre‑emptively with another hike.
Powell also pointed to stress in private credit, citing rising defaults and investor withdrawals in a roughly $3 trillion sector.
“I’m reluctant to say anything that suggests that we’re dismissive of the risk, but we’re looking for connections to the banking system and things that might result in contagion. We don’t see those right now,” he said.
“What we see is a correction going on, and certainly there’ll be people losing money and things like that. But it doesn’t seem to have the makings of a broader systemic event.”
What it meant for mortgage pricing
The Fed’s stance contrasted with growing market chatter about renewed tightening as the Iran war pushed Brent crude well above $100 a barrel and gasoline prices higher.
Powell acknowledged that “higher energy prices will push up overall inflation” in the near term, but stressed that officials are watching whether households and markets start to expect persistently higher inflation before revisiting the rate path.
On the front lines of the mortgage market, some brokers already warned clients that geopolitics, not Fed cuts, were steering rates.
“As far as its impact on the market, what people don’t realize is war is inflationary,” said Amir Nurani, broker‑owner at Left Coast Leaders, in a recent interview with Mortgage Professional America.
“Because you have spikes in oil prices. The other part of that is when we go into war, the likelihood of the Fed needing to print money goes through the roof.”
Nurani said borrowers waiting for a rapid drop in mortgage rates risked being left on the sidelines. “I don’t think the path for interest rates is going to be straight down,” he said.
“I think it’s going to be a slow and steady chop down.”
A long shadow from inflation psychology
Powell, who repeatedly reminded his audience that “we just don’t know” how the Iran conflict would ultimately affect growth, inflation and markets, emphasized the importance of keeping longer‑run inflation expectations anchored after several years of above‑target inflation.
He pointed to the risk that a “repeated set of things” – from wars to tariffs to energy shocks – could shift public psychology in ways that forced the Fed to stay restrictive for longer, even if the labor market softened.
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