Leaders at the Federal Reserve said Thursday that they expect to start raising interest rates next month as planned, despite the increased economic risk and uncertainty generated by Russia’s invasion of Ukraine.
“Barring an unexpected turn in the economy, I believe it will be appropriate to move the funds rate up in March and follow with further increases in the coming months,” Cleveland Fed President Loretta Mester said. The course of events in Ukraine will likely influence the pace at which rates are increased, Mester added.
Atlanta Fed President Raphael Bostic said that the central bank has its own estimates of how the Russian invasion will affect the economy. “If the numbers come in close to that I think that can we continue with our liftoff plan,” he said. “We’ll just have to see where things go. I know we have seen over the past several weeks that oil prices have increased dramatically, as have natural gas. That could have ripples.”
In a note to clients, Goldman Sachs economists Joseph Briggs and David Mericle said the level of inflation in the U.S. makes it more likely that the Fed will plow ahead. “The current situation is different from past episodes, when geopolitical events led the Fed to delay tightening or ease, because inflation risk has created a stronger and more urgent reason to tighten today than existed in past episodes,” they wrote.