The chairman of the US Federal Reserve, Jerome Powell, is scheduled to testify before Congress this week on Wednesday and Thursday, with market participants in both crypto and traditional markets now eagerly awaiting his first comments on the economy after the outbreak of the war in Ukraine. The testimony, delivered before the House Financial Services Committee, is the first time in nearly five weeks that the public has heard the Fed talk about the economy.
Since his last appearance, when Powell mainly talked about how the Fed is working to reduce inflation in the US, the economic prospects for the world have become much more complex. Among the factors complicating the picture are severe sanctions against Russia, a collapse of the Russian ruble and oil prices, which have risen to over $ 110 per barrel. “Inflation is lasting longer than we thought,” and we will use our tools to ensure that higher inflation “does not take hold,” Powell said, among other things, the last time he spoke publicly about Fed policy.
In addition to the war in Ukraine, COVID-19 measures in Europe and the USA have also been relaxed since Powell’s last appearance – a development that should boost economic activity.
The big question that the market now has for Powell is to what extent the consequences of the war will affect the planned tightening of the Fed’s monetary policy. The next planned interest rate adjustment in the US is scheduled for March 16, and it is expected that the Central Bank will raise interest rates by 0.25%. At an online seminar on Tuesday, Atlanta Fed President Raphael Bostic said that the Fed’s work has now become more difficult.
“Our hard job has now become much more difficult. Energy is changing a lot. The ability of people and goods to move through Europe – it looks like this will change a lot. This has implications for supply chains and a whole host of things. There’s a lot we need to figure out,” Bostic said, according to Reuters.
Since the beginning of the war in Ukraine, the yields of 2-year US government bonds fell from 1.6% To 1.36% On Wednesday at 10:00 UTC. Falling bond yields could further complicate the Fed’s efforts to raise market rates to counter inflation. In addition, it is feared that an environment of rising interest rates, combined with higher consumer prices and in particular higher energy prices, could drive the economy into so-called stagflation – a combination of economic stagnation and inflation.
“We are entering a phase of stagflation. The question is, is [Powell] focusing more on the ‘deer’ or is he focusing more on the ‘flation,'” Peter Boockvar, chief investment officer of Bleakley Advisory Group, told CNBC in a commentary yesterday.
Bitcoin (BTC) stood at USD, an increase of 2.3% In the last 24 hours and 15% in the last 7 days.