Former Fed president Gary Stern: Fed should not try to be heroic and stay in wait and see mode

• The Iran war creates dominant uncertainty, likely leading to higher energy prices, which will put upward pressure on inflation and downward pressure on economic activity.
• This situation exacerbates the Fed's dilemma in balancing its dual mandate of maximum employment and price stability.
• Stern recommends the Fed 'take no action' for several months, allowing time for clarity, as the US economy is flexible and resilient, and initial concerns may prove exaggerated.

Former Minneapolis Fed president Gary Stern discusses the economic impact of the Iran war, highlighting dominant uncertainty and potential inflationary pressures from higher energy prices. He advises the Federal Reserve to adopt a 'wait and see' approach, emphasizing the US economy's inherent flexibility and resilience despite current challenges.