Fed Under Pressure to Combat Inflation as War Pushes Gas Prices Higher

The Federal Reserve is under pressure to combat inflation, which has been above its 2% target for over five years. According to Lorie Logan, president of the Federal Reserve Bank of Dallas and a voting member of the Fed's rate-setting committee, 'modestly higher interest rates would better balance the outlook.'

Fed Chair Kevin Warsh has emphasized that the Fed will get inflation back to 2% without specifying how. He made this clear in his first news conference as chair last month and reiterated it in congressional testimony earlier this month, saying the Fed has 'no tolerance' for higher inflation.

However, some economists believe Warsh's tough talk may not be enough to curb inflation, especially with the recent resumption of fighting in the Middle East pushing gas prices back above $4 a gallon. Vincent Reinhart, chief economist at Dreyfus-Mellon and a former top Fed economist, said 'the Fed is looking at inflation well above goal, but mostly for reasons that it doesn’t have any influence on.'

John Williams, president of the New York Fed and vice chair of the Fed's rate-setting committee, expressed optimism that inflation has peaked and will edge down in the coming quarters. He cited the decline in gas prices before the Iran war restarted as a reason for this optimism.