Federal Reserve Chairman Jerome Powell said on Monday the central bank is closely monitoring inflation risks posed by rising energy prices due to the Iran war, but he cautioned that the scope for policy intervention is limited in such supply-driven shocks.Speaking at Harvard University in front of about 400 students, Powell said that energy shocks are generally short-lived and that monetary policy works with a lag.He said policymakers should remain alert to changes in inflation expectations. “You have to carefully monitor inflation expectations because you could get a series of big supply shocks and that could, you know, affect the public, businesses, price setters, households in general… Starting to expect higher inflation over time. Why wouldn’t this happen? Powell said, as quoted by the AP.His comments came as gasoline prices in the US neared $4 a gallon, mirroring rising global oil prices due to the ongoing conflict in the Middle East.Powell said that although inflation expectations are currently under control, repeated shocks could pose broader challenges to price stability.In his conversation, he also highlighted labor market concerns, especially for young job seekers. While unemployment remains low, hiring activity has decreased, leading to what economists describe as a “hire less, fire less” environment.Employers expect to add fewer than 10,000 jobs per month in 2025 — the weakest pace outside of a recession since 2002. After a relatively strong start this year in January with 126,000 jobs added, the economy lost 92,000 jobs the following month.Powell said technological changes, including the rise of artificial intelligence, could also impact hiring decisions, especially at entry-level roles.Despite near-term challenges, he expressed optimism about long-term economic prospects, noting that innovation has historically boosted productivity and living standards.“You’re in a situation where you really need to invest time to master the use of these new technologies,” Powell said. “There’s no denying that this is a challenging time to enter the labor market, it may take some patience and all that, but in the long run, this economy is going to give you great opportunities. Just be a little optimistic.”Powell also underlined the importance of maintaining the Federal Reserve’s independence amid political pressures.He said, “Great democratic institutions are very difficult to build and very easy to tear them down.”The Fed chair’s comments come amid continued criticism from President Donald Trump, who has urged the central bank to cut interest rates. However, Powell reiterated that the Fed must remain focused on its mandate of price stability and maximum employment.“We have very powerful tools at our disposal. They must be for maximum employment and price stability and financial stability,” he said. “There’s always a time when an administration looks and says it would be good to use that tool for something else… We just have to be in a position where we’re not trying to work against any politician or any administration, but we have to be careful to stick to what we’re doing.”