Federal Reserve is unlikely to change course after Ukraine’s invasion

Federal Reserve officials are turning wary of Russia’s invasion of Ukraine, though some have signaled in recent days that geopolitical tensions are unlikely to cause them to withdraw their support. support for the US economy at a time when the job market is booming and prices are falling. climb quickly.

The stock index is ecstasy and price Key commodities – including oil and gas – have surged and may continue to rise as Russia, a major producer, responds to US and European sanctions.

That makes invasion a complicating risk for the Fed: On the one hand, its decline is likely to continue to push up price inflation, which is already running low. fastest rate in 40 years. On the other hand, it could hurt growth if stock prices continue to plummet and make consumers in Europe and the United States nervous about pulling back on spending.

The extent of the potential economic impact is far from certain, and for now, the central bank the officials signaled that they will continue to raise interest rates starting next month, a policy move that will make borrowing more expensive and cool the economy.

“I see the geopolitical situation, unless it will significantly deteriorate, as part of the greater uncertainty we face in the United States and our U.S. economy,” said Mary C. Daly, president of the Federal Reserve Bank of San Francisco, said Wednesday at an event hosted by the Los Angeles World Affairs Council. “We’ll have to navigate that as we move on.”

Daly said she doesn’t “see anything right now” that could disrupt the Fed’s plans to raise rates.

Raphael Bostic, president of the Federal Reserve Bank of Atlanta, said at an event on Tuesday that the situation in Ukraine presents “downward risks” to growth, but suggested he remains in favor of a withdrawal some of the Fed’s help from the economy.

But some analysts are warning that the consequences of the conflict could be significant,

Krishna Guha at Evercore ISI wrote in a research note on Thursday morning: “Typically, geopolitical crises end up being a blur for financial markets and a buying opportunity for investors. willing to look through the headlines. “We’re very wary of using that line today.”

Mr. Guha noted that Invasion can interrupt the post-Cold War world order and warned that soaring energy prices and the impact of sanctions “will further complicate the ability of central banks on both sides of the Atlantic to establish plan a gentle landing in the face of pandemic inflation.”

Economists have warned that a “soft landing” – in which central banks guide the economy on a sustainable path without triggering a recession – could be difficult to achieve at a time when prices and monetary policies across much of Europe and North America have softened. Substantial readjustment may be required.

https://www.nytimes.com/2022/02/24/business/economy/russia-ukraine-federal-reserve-interest-rates.html Federal Reserve is unlikely to change course after Ukraine’s invasion

Fry Electronics Team

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