Ukraine-Russia war's economic implications 'highly uncertain': Fed Chair

By Ovunc Kutlu

ANKARA (AA) - Financial and economic implications for the global and US economies because of the Ukraine-Russia war are 'highly uncertain,' Federal Reserve Chair Jerome Powell said Wednesday.

"Although the invasion of Ukraine and related events represent a downside risk to the outlook of economic activity, FOMC participants continue to foresee solid growth," Powell said at a news conference after the Fed made its first hike since December 2018.

The Federal Open Market Committee (FOMC) announced it raised interest rates by 25 basis points to between the range of 0.25% - 0.50%.

"Higher energy prices are driving up overall inflation," said Powell. "The surge in the prices of crude oil and other commodities that resulted from Russia's invasion of Ukraine will put additional upward pressure on near-term inflation here at home."

The Fed chair said high inflation imposes higher costs, especially for food, housing and transportation.

He said the Fed expects inflation to return to its 2% target by starting its monetary tightening with the labor market remaining strong.

"Inflation is likely to take longer to return to our price stability goal than previously expected," he said.

While the FOMC estimates inflation to average 4.3% for 2022 and 2.7% for 2023, forecast for 2024 put it at 2.3%, according to its projections released Wednesday.

The Fed's median federal funds rate projection was raised to 1.9% for 2022, which means the central bank can hike rates by 25 basis points in each of its remaining six meetings this year.

Powell said the federal funds rate projection was a full percentage point higher than a previous projection in December.

"Of course, these projections do not represent a committee decision or plan, and no one knows with any certainty where the economy will be from a year from now," he said.