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
As far as global economic outlook is concerned, the conflict in Ukraine has created uncertainty. This week Federal Reserve Chairman Jerome Powell talked about the outlook of the U.S. economy and the “tremendous hardship” Ukrainian citizens face. Powell anticipates that the benchmark rate will rise by quarter point percentage despite this inconstancy.
“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. He continued, “The near-term effects on the U.S. economy of the invasion of Ukraine, ongoing war and sanctions, as well as events to come remain highly uncertain,” he said.
The ability to set appropriate monetary policies in such an environment is dependent on our understanding of how the economy changes. The evolving outlook and incoming data will require us to react quickly.
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’
Powell said that inflation in the U.S. is continuing to increase and noted that the central banking wants to keep it from increasing. Powell stated that tackling the inflationary pressures will require a prudent approach. “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.
Russia is currently facing significant sanctions, including being removed from SWIFT’s international 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.
People have been affected by the ongoing conflict. assumeThe Fed could backtrack from increasing bank rates and tapering. The central bank could leverage the war to avoid fiscal responsibility, similar to Covid-19. However, Fed members appear cautious and still wish 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? Is it likely that the Fed will hike the benchmark interest rate in the next month? Please comment below on your views.
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