Fed Cautious on Labor Market, Inflation Amid Mideast Tensions

Federal Reserve officials expressed growing caution about the U.S. labor market's vulnerability and rising inflation pressures on Tuesday, as escalating tensions in the Middle East threaten to disrupt economic stability. In remarks at the University of Detroit Mercy, Vice Chair Philip Jefferson highlighted downside risks to employment alongside upside risks to prices, underscoring the central bank's delicate balancing act between its mandates of full employment and 2 percent inflation.

Jefferson described the labor market as roughly in balance but fragile, noting that recent job gains have kept the unemployment rate steady at 4.3 percent. However, he warned that businesses' reluctance to hire, amid a low-hiring environment, could persist if economic uncertainty lingers. "A sufficiently large negative economic shock could push job gains below that range, driving up the unemployment rate," Jefferson said. He added that the current elevated uncertainty risks prolonging subdued job growth.

These concerns echoed the minutes from the Federal Open Market Committee's March 17-18 meeting, released earlier this week, where participants noted low job gains and highlighted the market's...