The outlook for Federal Reserve rate hikes after March may become less clear if Russia continues its incursion into Ukraine. That’s because the tensions have pushed up the price of oil and gasoline, a major purchase for many Americans, and it’s the U.S. consumer that drives about 70% of the U.S. economy. The prices of oil and other commodities have been rising on concerns that Russia’s troop movements into Ukraine and sanctions from the U.S. and allies could potentially lead to limited supplies. Russia is a major exporter of oil and natural gas. … Economists said it will be the price of oil that could ultimately drive Fed policy. The jump in oil prices is first a catalyst for inflation, and eventually it could become disinflationary if the price goes higher and endures, dampening economic growth. … “It makes things more complicated,” said Bruce Kasman, JPMorgan’s chief economist. … Kasman expects the Fed will proceed with a quarter-point increase in the fed funds rate in March, with the Ukraine situation weakening the argument for a half-point hike. His forecast is for six more rate hikes over the balance of the year. This is where the outlook becomes muddy for the central bank: On the one hand, a growth scare could slow the pace of hiking. On the other hand, economists say, the Fed may become even more aggressive if it sees a sharper pickup in inflation.
Source: CNBC
