Federal Reserve Chairman Jerome Powell told members of the House Committee on Financial Services today that he expects the Fed to raise interest rates at the next meeting of the Federal Open Market Committee on March 15-16. Powell told the committee that with inflation well above 2% and a strong labor market, it is appropriate to raise the target range for the federal funds rate and that he supports a 25 basis point rate hike.
Following the invasion of Ukraine by Russian troops, Powell warned that the near-term effects on the U.S. economy remain highly uncertain and that making monetary policy in this environment “requires a recognition that the economy evolves in unexpected ways.” and “we will need to be nimble in responding to incoming data and the evolving outlook.” Powell also told the committee that energy prices have already moved up further due to the Ukraine war and that those increases are likely to move through the economy, push up inflation and weigh on spending. He added that “we can’t know how large or persistent those effects will be. That simply depends on events to come.”
Asked about the possible use of digital currencies in Russia to avoid recently enacted sanctions for the Ukraine invasion, Powell told the committee that it underscored the need for congressional action on digital finance, including cryptocurrencies. “Ultimately what’s needed is a framework and in particular ways to prevent these unbacked cryptocurrencies from serving as a vehicle for terrorist finance and general criminal behavior, tax avoidance and the like,” Powell said.