Former Treasury Secretary Janet Yellen warned that the Iran conflict has complicated the Federal Reserve's path forward, potentially keeping interest rates unchanged longer than previously expected. Speaking at a shipping industry conference in Long Beach, Yellen noted that depending on how long the conflict affects oil markets, it could both slow US economic growth and increase inflationary pressures.

Inflation is already running about a percentage point above the Fed's 2% target, with President Trump's tariffs contributing roughly half a percentage point to the current 3% pace. Yellen emphasized that if the Strait of Hormuz remains closed beyond a few days, oil prices could stay elevated or climb higher, forcing the Fed to maintain its current stance despite pressure to cut rates.

The former Fed chair also criticized Trump administration moves that she said threaten the central bank's independence, including attempts to remove Governor Lisa Cook and a Department of Justice investigation into Fed Chair Jerome Powell's remarks about cost overruns in central bank building renovations. Yellen warned that criminal charges against Powell would represent a serious blow to economic policy and could be highly inflationary.