Powell acknowledges the 'highly uncertain' impact of Ukraine, but says rate hikes are still on the way

Interest rate hikes are still on the way, according to Federal Reserve Chairman Jerome Powell, who noted on Wednesday that the Russia-Ukraine conflict has thrown the outlook into doubt.

Powell expects a sequence of quarter-percentage-point rate hikes, but he left the door open to acting more aggressively if inflation persists, according to CNBC. The central bank director noted the "tremendous hardship" the Russian invasion of Ukraine is inflicting in statements prepared for two hearings before House and Senate lawmakers in Congress.

“The implications for the U.S. economy are highly uncertain, and we will be monitoring the situation closely,” Powell said.

“The near-term effects on the U.S. economy of the invasion of Ukraine, the ongoing war, the sanctions, and of events to come, remain highly uncertain,” he added. “Making appropriate monetary policy in this environment requires a recognition that the economy evolves in unexpected ways. We will need to be nimble in responding to incoming data and the evolving outlook.”

He added that the Fed wants to bring inflation under control, but that will act cautiously as it learns more about the economic repercussions of the Ukraine conflict.

The comments come as inflation in the United States reaches 40-year highs, worsened by a Ukraine crisis that has pushed the price of oil to its highest levels in the past 10 years. In January, consumer prices rose 7.5 percent year over year, the highest 12-month gain since 1983, according to the Fed's preferred inflation indicator.

Powell and his counterparts have been hinting for while about their plans to begin hiking interest rates to combat inflation. On Wednesday, he maintained his position that the approach will include "interest rate increases," as well as hints that the Fed will eventually begin to reduce its bond holdings.

“We will use our policy tools as appropriate to prevent higher inflation from becoming entrenched while promoting a sustainable expansion and a strong labor market,” he said. “We have phased out our net asset purchases. With inflation well above 2 percent and a strong labor market, we expect it will be appropriate to raise the target range for the federal funds rate at our meeting later this month.”

The Fed chairman told congressmen earlier this month that the central bank is prepared to raise interest rates as works to calm down excessive inflation — noting that while Russia's invasion of Ukraine is increasing economic uncertainty, it isn't yet knocking the Fed off track.