“When we use the term stagflation, I always have to point out that that was a 1970s term, at a time when unemployment was in double figures and inflation was really high,” Powell said at a press conference following the Fed’s decision to hold rates steady for the second straight meeting. “That’s not the situation we’re in.”

“Maybe that’s just me,” he added.

What the Fed is dealing with, Powell conceded, is the same thing they’ve dealt with for the last year, “tension between the goals”—inflation stuck well above 2% and a labor market that’s quietly deteriorating. Core PCE inflation is running at 3%, with Powell saying he blamed roughly half to three-quarters of a percentage point of the overshoot directly to tariffs. Meanwhile, the February jobs report showed employers cutting 92,000 positions, and once you adjust for the margin of errors in the data, private-sector job creation has effectively hit zero.

Powell framed that as a fragile equilibrium rather than a crisis. With immigration sharply curtailed, both labor supply and demand have fallen in tandem, keeping the unemployment rate stable at 4.4% even as hiring has flatlined. “You’ve got a sort of zero employment growth equilibrium,” he said. “That’s balance, but it does have a feel of downside risk, and it’s not kind of a really comfortable balance.”

The war in Iran has complicated the balance on both sides. Brent crude jumped above $109 a barrel Wednesday, up from around $72 before the conflict started, and gas prices have surged nearly a dollar a gallon in just four weeks. Economics 101 teaches to “look through” energy shocks, because they have contradictory effects: “upward pressure on inflation” and “downward pressure on spending and employment,” as Powell said. 

But after five years of inflation being above the 2% target, Powell was notably cautious about the Fed’s ability to “look through” this one, saying that he did not “take it lightly.” He warned that the accumulation of shocks —”the tariff shock, the pandemic, and now an energy shock” — is “a repeated set of things, and you worry that that’s the kind of thing that can cause trouble for inflation expectations.” Yet he denied that America has become plunged into an era of frequent supply shocks, framing them as “one-offs.”

Powell was very clear about how much they can predict about the oil shock: “Nobody knows,” he said of the war’s potential economic fallout. “They could be much smaller or much bigger. We just don’t know.” Several officials apparently felt the same way about their own forecasts: “A number of people mentioned, if we were ever going to skip an SEP, this would be a good one.”

Asked what would guide the Fed’s thinking at its next meeting in six weeks, Powell said, “we’ll have to wait and see,” to laughter in the reporter’s room.

“We’re going to learn a lot,” he said, but added that he wouldn’t speculate on how events in the Middle East would shape the committee’s next move. “I don’t know how it’s going to affect our thinking. I really don’t.”