By Kane Wu and Jiaxing Li
HONG KONG, April 15 (Reuters) - Former U.S. Treasury Secretary Janet Yellen sees one interest rate cut by the Federal Reserve as possible this year, even as the Iran war creates supply shocks in the global economy that put pressure on inflation.
"Short-term inflation expectations are up slightly, but they're going to watch all of that very carefully, and I think they have an open mind," Yellen said on Wednesday at the HSBC Global Investment Summit in Hong Kong.
"If I had to
write one thing down on a piece of paper, if I'm going into the next FOMC meeting where the forecasts are produced, I suppose my guess would be that maybe there would be a cut later in the year."
Fed policymakers in March opted to keep benchmark interest rates steady in their current 3.50% to 3.75% range, and a majority projected at least one rate cut would likely be appropriate this year.
President Donald Trump has repeatedly criticised Fed Chair Jerome Powell for not undertaking the steep rate cuts Trump feels the U.S. economy requires, and has said he believes that his nominee to replace Powell, Kevin Warsh, will deliver them.
Yellen said the Middle East conflict had intensified economic uncertainty.
"It puts upward pressure on inflation and we've already seen that in recent inflation reports, but we're likely to see more," she said. "This is really a broad supply shock."
The six-week Iran war has resulted in financial market upheaval as investors weigh the potential impact on inflation and interest rates in major economies around the world. The conflict has sent crude oil prices surging more than 30%.
U.S. consumer prices increased by the most in nearly four years in March amid a record surge in the cost of gasoline and diesel.
Traders have now priced out any wagers on a Fed rate cut this year, compared with bets for roughly two cuts at the start of this year.
(Reporting by Kane Wu and Jiaxing Li in Hong Kong; Writing by Scott Murdoch; Editing by Jacqueline Wong and Kevin Buckland)
