Whether the U.S. Federal Reserve "looks through" the impact of Iran war-induced higher oil prices as it assesses inflation will partly depend on whether there is more progress this year in bringing down core inflation driven by goods prices, Fed Chair Jerome Powell said Wednesday.

"The thing that's really important that we see this year is progress on inflation through a reduction in goods inflation as the one-time effects on prices of tariffs go through the system, go through the economy," Powell said.

"The question of whether we look through the energy inflation doesn't really arise until we have kind of checked that box," he added.

Powell continued to say the latest round of Fed forecasts are a bit of a shot in the dark given uncertainty created by the Iran war.

Commenting on the Fed’s Summary of Economic Projections released with the Fed meeting outcome, Powell said:

“This is one of those SEPs where a number of people mentioned, if we were ever going to skip an SEP, this would be a good one, because we just don't know” what’s going to happen given uncertainties around the war.

Generative artificial intelligence tools will certainly contribute to productivity gains for years to come, Powell said, but urged caution on whether AI's impact will be disinflationary.

He said the current U.S. AI data center building boom currently was putting upward price pressure on many goods and services and was "probably pushing inflation up at the margin."

In the near term, "you're not looking at something that would immediately call for lower rates, or that would be lowering inflation over time," Powell said.

He added that it was an "empirical question" on whether AI will expand supply faster than demand, but it will contribute to higher productivity over time.

"Higher productivity is the thing that allows incomes to rise over time, and so it's a great thing," Powell said

Powell also said he will stay on as central bank leader if his successor is not confirmed by May, when his current chair term ends.

“If my successor is not confirmed by the end of my term as chair, I would serve as chair pro-tem” until a successor is confirmed, Powell said in a press conference following the latest Fed meeting.

Powell said that is what the law calls for and “that's what we've done on several occasions, including involving me, and that's what we're going to do in this situation.”