Just a couple of weeks ago, the prospect of the Federal Reserve chair testifying for two days on Capitol Hill was seen as a major news event before the central bank’s pivotal March meeting. We’re in a different world now. Powell on Wednesday confirmed, in unusually blunt terms, what people widely expected: The Fed is likely to raise interest rates by a quarter percentage point at its March 15-16 meeting. But he spent most of the hearing peppered with questions about what the Russian invasion of Ukraine meansfor inflation, economic growth and the Fed’s policy path in 2022, as well as for financial stability. In short, Powell said, it’s much too soon to know. Some key quotes from the hearing: —“We develop working plans for making adjustments to monetary policy over the coming months, and then we are flexible as plans meet the real world.” Our Victoria Guida writes: Powell is saying that the Fed can’t reliably tell people what the central bank will do for the rest of the year because the outlook is too uncertain. All it can tell them is how it might react to different scenarios. But he said the Fed is likely to raise rates steadily this year, and faster than it did in the previous rate-hiking cycle. —“The price of oil depends on events that haven’t occurred yet. ... The effects are going to be passed through into gas prices, into lower economic activity and into inflation.” Higher gas prices might only be a temporary shock to the economy that will fade as more U.S. production comes online. But since inflation is already at a four-decade high, the issue is whether oil prices could mix dangerously with other rising prices. Powell suggested that higher oil prices might not end up changing the long-term inflation outlook, or the Fed’s policy plans, but policymakers will be watching to see if it does. — “The United States, our financial institutions and our economy do not have large interactions with the Russian economy. It’s a relatively small thing, and it’s gotten smaller and smaller in recent years, so there wouldn’t be direct effects from these kind of things on the U.S. economy.” Powell emphasized that the U.S.’s ties to Russia, through trade and investment, are not significant and are unlikely to cause problems on their own. Instead, the U.S. might see more of an indirect effect through higher prices since Russia is a major exporter of commodities like wheat and metals like steel, Victoria writes. Powell made similar comments about U.S. financial institutions, saying their exposure to Russian firms was relatively minor and unlikely to trigger any systemic financial issues. —“Everything that we can do to protect ourselves against cyber, we’re doing it. We’re doing it — the private, large financial institutions are doing it. … We’re certainly on high alert and will continue to be.” Powell has warned before about the risks of a potential cyber attack on the U.S. economy or financial system and market infrastructure. Those dangers are much more elevated now given that the U.S. and its European allies have imposed tough economic sanctions on Russia in response to Ukraine. He said there haven’t been troubling incidents yet, but it’s clear that this is top of mind for the central bank. STAY TUNED — Powell is set to appear before the Senate Banking Committee this morning for the second day of testimony. Expect Senate Democrats, and especially Chair Sherrod Brown of Ohio, to use the opportunity to pressure their GOP colleagues to allow a vote on all five of President Joe Biden’s Fed nominees. Republicans continue to insist that Sarah Bloom Raskin, Biden’s pick to be Fed vice chair for supervision, hasn’t adequately answered questions from the committee. But don’t expect Powell to get drawn into it — When one Democratic lawmaker asked him Wednesday about the importance of having a full seven-member board of governors, he politely demurred. "I wouldn't want to comment directly or indirectly on the Senate. I'm a nominee and I await the Senate's judgment. I prefer not to get into that process." Speaking of process — We’ve seen some questions about whether Brown could simply call a vote during this morning’s hearing, when at least some of the committee’s Republicans will be present and providing a quorum. But it doesn’t work that way — Brown is required to provide several days’ advance public notice of any vote. We’ll be listening for clues from him about when he may reschedule. IT’S THURSDAY — Does it feel like the first Friday of the month just keeps coming at us faster and faster? We’ll get the February employment report tomorrow, showing jobs and wage gains last month as Omicron fizzled. Send us your non-farm payroll guesses, plus story ideas, tips and feedback, to kdavidson@politico.com and aweaver@politico.com, or on Twitter @katedavidson and @aubreeeweaver.
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