Close X
Monday, November 11, 2024
ADVT 
National

Fed's Powell: Russia's war on Ukraine will worsen inflation

Darpan News Desk The Canadian Press, 03 Mar, 2022 11:54 AM
  • Fed's Powell: Russia's war on Ukraine will worsen inflation

WASHINGTON (AP) — Federal Reserve Chair Jerome Powell warned Thursday that Russia's invasion of Ukraine, which has already driven up oil prices, will likely further magnify the high inflation that has engulfed the U.S. economy.

At the same time, Powell said he is committed to doing whatever it will take to slow inflation, underscoring the Fed's high-risk challenge in raising interest rates enough to stem price increases without tipping the economy into another recession.

The Fed chair, addressing the Senate Banking Committee on his second day of semiannual testimony to Congress on interest rate policies, stressed his belief that the economy is strong enough to withstand higher borrowing costs. His expression of confidence echoed his testimony Wednesday that the Fed can engineer a “soft landing" in which the economy would slow enough to ease inflation even while hiring and growth remain healthy.

“Commodity prices have moved up — energy prices, in particular," Powell said when asked about the economic consequences of Russia's invasion of Ukraine. "That’s going to work its way through the U.S. economy. We’re going to see upward pressure on inflation, at least for a while.”

Consumer prices are already rising at their fastest pace in four decades, having jumped 7.5% in January compared with 12 months earlier. Gas prices, a key driver of that increase, have soared 40% over the past year. In the view of most economists, the surge in inflation is largely a consequence of a shortage of labor and components resulting from bottlenecked supply chains, much of it resulting from the global economy’s swift rebound from the pandemic recession.

Price spikes, though, have also spread to areas such as rents and restaurant meals, where rapid economic growth and higher wages are driving up costs.

Responding to a question from Sen. Steve Daines, a Montana Republican, Powell noted that inflation is generally thought to rise about 0.2 percentage point for each $10 increase in the price of a barrel of oil. Oil prices have surged by $40 a barrel since early December to about $110, suggesting that overall inflation will be higher than it would otherwise be in the coming months.

Sen. Richard Shelby, an Alabama Republican, urged Powell to do “what it takes” to control inflation. He praised Paul Volcker, who led the Fed in the early 1980s and who sharply increased the Fed’s benchmark short-term rate to choke off the double-digit inflation of the 1970s. Volcker's actions also led to a deep recession in 1981-82.

Shelby asked Powell whether he, like Volcker, was willing to be “draconian” to “get the inflation under control and protect price stability.”

Powell replied that Volcker was the “greatest economic public servant of the era” and added that, "I hope history will record that the answer to your question is yes.”

But Powell stressed his belief that the Fed can bring down inflation without triggering a recession. The economy grew last year at the fastest pace since the 1980s, the Fed chair noted, the unemployment rate is at a low 4% and hourly pay is rising steadily, before adjusting for inflation.

Job openings are near a record high, Powell added, and Americans are quitting their jobs at a record pace, usually for better, higher-paying positions.

“This is a great labor market for workers, particularly for workers” among those in the lowest one-quarter of incomes, he said. For these workers, pay gains over the past two years have slightly exceeded price increases, according to research by the Federal Reserve Bank of Dallas.

On Wednesday, Powell had said that he would propose a quarter-point rate hike at the Fed's next meeting in two weeks, which would be the first rate increase since 2018. The Fed chair repeated Thursday that if inflation didn't decline this year as he expects, he is open to bigger hikes at some later central bank meeting this year.

Powell testified to Congress in his capacity as acting chair, after his term officially expired in February. President Joe Biden has nominated Powell to a second four-year term. But his appointment, along with those of four other nominees to the Fed's Board of Governors, has been delayed by Republican opposition to one nominee, Sarah Bloom Raskin, as the Fed's top banking regulator.

Republicans on the committee have boycotted a vote on all Biden's nominees, including Powell, because of their opposition to Raskin, who they say would use the Fed's regulatory authority to discourage banks from lending to oil and gas companies. Democrats, as well as many banking executives, counter that Raskin's views aren't out of the mainstream and that she simply wants the Fed to consider the risks that climate change poses to the financial system.

MORE National ARTICLES

VPD seeks person of interest in Tatlow Park homicide

VPD seeks person of interest in Tatlow Park homicide
Police have released security video taken December 9th of a man walking on the south side of Point Grey Road bordering Tatlow Park, the day they believe Justis Daniel was murdered in the caretaker's residence in the park.

VPD seeks person of interest in Tatlow Park homicide

47 Canadians charged in global investigation

47 Canadians charged in global investigation
The Mounties said 186 charges have been laid in Canada so far during the investigation, dubbed Operation H. Arrests have been made in eight provinces over the past two years, they said, adding the investigation is still underway.

47 Canadians charged in global investigation

Judge dismisses bid to halt federal emergency measures, calling issue moot

Judge dismisses bid to halt federal emergency measures, calling issue moot
The group and Nagle, who took part in the anti-government protests, asked the Federal Court for an injunction last month to stay Liberal use of the emergencies law and associated measures while their full case plays out.

Judge dismisses bid to halt federal emergency measures, calling issue moot

Half of South Asian women plan to quit job: study

Half of South Asian women plan to quit job: study
More than half of the 700 South Asian women respondents to a survey by CulturaliQ and the Pink Attitude Evolution say they are planning to leave their jobs for other opportunities.

Half of South Asian women plan to quit job: study

WestJet Group to buy Sunwing Airlines amid turbulent global travel market

WestJet Group to buy Sunwing Airlines  amid turbulent global travel market
Under the agreement, a new tour operating business unit will be created under the WestJet Group, to include both Sunwing Vacations and WestJet Vacations Inc. and will be led by Sunwing CEO Stephen Hunter.

WestJet Group to buy Sunwing Airlines amid turbulent global travel market

Vancouver home sales up 50% from start of year

Vancouver home sales up 50% from start of year
The B.C. board says Metro Vancouver home sales totalled 3,424 last month, down 8.1 per cent from 3,727 in February 2021 and up 49.8 per cent from 2,285 in January 2022. 

Vancouver home sales up 50% from start of year