Federal Reserve chairman Jerome Powell still expects to see interest rate hikes starting in March, but the Fed chief further stressed that the central bank will “need to be nimble.” In remarks prepared for members of U.S. Congress, Powell discussed the Russian invasion of Ukraine, noting that the “implications for the U.S. economy are highly uncertain” and the Fed “will be monitoring the situation closely.”
US Central Bank Plans to Make ‘Appropriate Monetary Policy’ in This Uncertain Environment
The warfare in Ukraine has added a touch of uncertainty into the air as far as the global economy is concerned. This week Federal Reserve Chairman Jerome Powell talked about the outlook of the U.S. economy and the “tremendous hardship” Ukrainian citizens face. However, despite the inconstancy, Powell expects to see the benchmark bank rate go up by a number of quarter-point percentage increases.
“The implications for the U.S. economy are highly uncertain, and we will be monitoring the situation closely,” Powell said in a statement. “The near-term effects on the U.S. economy of the invasion of Ukraine, the ongoing war, the sanctions, and of events to come, remain highly uncertain,” he added. The Fed chief continued:
Making appropriate monetary policy in this environment requires a recognition that the economy evolves in unexpected ways. We will need to be nimble in responding to incoming data and the evolving outlook.
Despite Implications of the Ukraine War and Russian Sanctions, Powell Believes It Is Still ‘Appropriate to Raise the Target Range for the Federal Funds Rate’
Inflation in the U.S. continues to rise and Powell remarked that the central bank wants to prevent further increases. However, tackling inflationary pressure will be done with a cautious attitude, Powell said. “The bottom line is that we will proceed but we will proceed carefully as we learn more about the implications of the Ukraine war on the economy,” the central bank chairman added.
Meanwhile, Russia has been dealing with significant sanctions such as being cut from the international SWIFT payment network. The gas giant Shell announced that it was ending its “joint ventures with Gazprom and related entities.” The Tech firm Oracle tweeted Wednesday that it has “already suspended all operations in the Russian Federation.” Fedex has explained to customers that the company has ceased managing “inbound service to Russia until further notice,” while UPS is doing the same.
The ongoing conflict has made people assume the Fed may back away from tapering and increasing bank rates. Similar to Covid-19, the war could be leveraged by the central bank to further skirt away from fiscal responsibility. The current perspective, however, is Fed members seem cautious, but they still want to raise rates. Atlanta’s Federal Reserve branch president favors a 25 BPS rate hike and Powell fully expects the Fed to use the central bank’s policy tools.
“We will use our policy tools as appropriate to prevent higher inflation from becoming entrenched while promoting a sustainable expansion and a strong labor market,” Powell concluded on Wednesday. “We have phased out our net asset purchases. With inflation well above 2 percent and a strong labor market, we expect it will be appropriate to raise the target range for the federal funds rate at our meeting later this month.”
What do you think about the U.S. central bank chief’s statements about the situation in Ukraine and the American economy? Do you think the Fed will raise the benchmark interest rate this month? Let us know what you think about this subject in the comments section below.
Image Credits: Shutterstock, Pixabay, Wiki Commons
Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.