Two Federal Reserve officials stated on Tuesday that the US-Israel strikes on Iran have introduced new uncertainties for policymakers, with the key question being how long energy prices might remain elevated.

Minneapolis Fed President Neel Kashkari, speaking at the Bloomberg Invest conference in New York, said, "It is too early to judge the impact of this on inflation and its duration."

Kashkari, who had previously anticipated one interest rate cut this year, indicated he is now less certain about that forecast, stating, "Given the current geopolitical events, we need to acquire more data."

New York Fed President John Williams, speaking at a separate event, noted that the impact on financial markets so far has been "relatively mild," with oil prices having risen but not in a "dramatic" fashion.

When asked in Washington on Tuesday about the potential impact of the conflict on US inflation, Williams told reporters, "We need to observe how long this situation persists."

Oil prices surged following the joint US-Israel strikes on Iran over the weekend. Investors are assessing the potential economic and inflationary impacts of a prolonged Middle East conflict, leading to higher US Treasury yields and gold prices.

Williams added that rising oil prices could have a "more significant" impact on Europe and potentially create spillover effects for the global economy. He said, "The crucial question is, quantitatively, how large this effect will be for the US specifically, and how long its impact on price stability will last."

Earlier, speaking at an event hosted by America’s Credit Unions, Williams suggested that further interest rate cuts could be warranted if inflation slows further after the bulk of the tariff effects have passed.

In his prepared remarks, Williams stated, "If inflation evolves as I expect, it will eventually be necessary to ease policy further to prevent monetary policy from becoming overly restrictive inadvertently."

He added that tariffs should exert some additional upward pressure on consumer prices in the first half of this year, after which he expects the inflation rate to fall to 2.5% by late 2026 and to 2% in 2027.

Simultaneously, Williams noted "encouraging signs of stabilization" in the labor market in recent months, with the unemployment rate expected to continue declining modestly this year and next, supported by "solid" growth. He projected economic growth of around 2.5% for the year.

"Given the absence of second-round effects and well-anchored inflation expectations, I anticipate the price impact of tariffs will be primarily one-time," he said, adding that the peak effect of the tariffs would pass "later this year."

Given that the full impact of tariffs has not yet materialized, progress toward the Fed's 2% inflation target has "paused temporarily."

Following data showing a rebound in hiring and a lower unemployment rate in January, a growing number of Fed officials have pointed to signs of labor market stabilization. Many policymakers now prefer to wait for further evidence that inflation is returning to the Fed's 2% target. However, some other officials are concerned that job growth is not broad-based enough and that further rate cuts may still be necessary.

Williams commented that the job market remains in an unusual state of "low hiring, low firing." He also noted that household surveys indicate more pessimistic views, which provides a "cautionary signal" for policymakers to monitor closely.

At another event, Kansas City Fed President Jeffrey Schmid pointed to recent data suggesting the labor market is broadly in balance but reiterated that inflation remains too high, with price pressures evident in both goods and services affected by tariffs.

"Inflation has been above the Federal Reserve's target for nearly five consecutive years," Schmid said in prepared remarks for an event in Denver on Tuesday. "I believe we have no room for complacency."