According to the Federal Reserve boss, the “results” of the war are “extremely uncertain” for the US economy.

The “results” of the war on the U.S. economy in Ukraine are “extremely uncertain,” but nonetheless do not prevent the U.S. central bank from raising key interest rates in two weeks, said Jerome Powell, Governor of the agency. Said.

“The conflict is causing great difficulty for the Ukrainian people,” lamented the Federal Reserve Head at a hearing in the House of Representatives. “The short-term impact of Ukraine’s aggression, ongoing wars, sanctions, and future events on the US economy remains highly uncertain.”

He said US financial institutions and the economy “do not interact very well with the Russian economy.” He argued that sanctions on Moscow “hence not have a direct impact” on the United States. However, “it is difficult to predict side effects.”

He also said he would “watch the situation carefully” and emphasized that the Fed would show “great flexibility” in response to how the outlook for the world’s largest economy changes.

In the context of the war in Ukraine, the strict economic sanctions imposed on Russia by the United States and others, and unpredictable events, “making good monetary policy decisions” means that the economy is changing in unexpected ways. We need to admit, “he admitted.

However, he considers raising key interest rates “appropriate” at the March 15th and 16th meetings, given record inflation.

He also specified a proposal to raise interest rates by a quarter percentage point (0.25 points). This is a modest increase that is justified in the context.

-“Price stability”-

But if inflation turns out to be high, he added, “we are ready to act more aggressively by raising rates by more than 25 basis points (0.25 percentage points) at subsequent meetings.” ..

Since March 2020, key rates have been in the range of 0% to 0.25%.

Russia’s invasion of Ukraine seriously complicates the work of powerful American financial institutions, as prices, especially energy prices, come at a time when prices were already very high around the world.

Situations related to supply shortages and a strong recovery in international demand after the Covid-19 pandemic was lifted in many countries.

The Federal Reserve Board (FRB) said in a beige book published Wednesday in a monthly survey of US companies that logistics and labor shortages continued in February.

Rising labor and material costs are further accelerating inflation, the highest in 40 years.

Prior to the conflict in Eastern Europe, some economists expected a surge in March.

-“Soft Landing”-

However, Powell cautioned in light of the situation. But he said he was convinced of the Fed’s ability to perform “soft landings,” that is, “control inflation without causing a recession.”

So far, we have recalled that in the United States, “economic activity resumed at a stable pace of 5.5% last year, reflecting the progress of vaccination and the resumption of the economy,” but with the support of the Fed and the government. ..

In addition, he states that the “labor market is very tight”, with significant labor shortages and wages rising “at the fastest pace in many years”.

The unemployment rate has fallen sharply over the past year to 4% in January, and with the exception of the war in Ukraine, a series of rate hikes are in place this year.

“We know that the best we can do to support a strong labor market is to promote sustainable expansion, which is only possible in an environment where prices are stable. “We are,” said Jerome Powell.

Finally, the Fed reiterated its expectation that inflation would slow “as supply constraints (mitigation) and demand (moderate) this year.” But he was cautious. “We humbly cannot predict when the turning point will be.”

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