**Fed’s Powell Says Ukraine War Creates Risks of Higher Inflation**
**Central bank wants to avoid adding to uncertainty after Ukraine invasion, Fed chairman says**
**by Nick Timiraos, The Wall Street Journal, 3/3/2022**
**“We’re going to see upward pressure on inflation at least for a while,” because of Russia’s role in global energy and other commodity markets, Federal Reserve Chairman Jerome Powell told the Senate Banking Committee on Thursday. Powell said he would propose a quarter-percentage-point interest-rate increase at the central bank’s meeting in two weeks amid high inflation, strong economic demand and a tight labor market....he laid the groundwork for the possibility of half-point increases this summer, pushing back against the idea that more traditional quarter-point increases represent a speed limit for the Fed.**
**Fed officials have grown anxious because of signs labor markets are overheating, with wage gains well above their pre-pandemic highs, and the risk that consumers and businesses will expect larger price increases in the future, which could foster persistently higher inflation....**
**Sen. Richard Shelby (R., Ala.) pushed Mr. Powell to say whether he would follow the example set by former Fed Chairman Paul Volcker in the 1980s to push down inflation at all costs. “I would hope history will record that the answer to your question is yes,” said Mr. Powell....** [end quote]
Inflation is definitely heating up. The price of chicken at Wal-Mart rose 25% in the past week. Gas is over $4 at some gas stations in my town.
Aside from the sudden drop in the 10 year Treasury yield caused by Russia’s invasion of Ukraine, the yield has been rising since last summer. The 10-Year Breakeven Inflation Rate is 2.71%, showing that the markets expect that 2022’s high inflation will be brought under control.
I remember well what Volcker had to do to bring entrenched inflation under control. The 10 year Treasury yield was raised to almost 16%. The 1980-82 recession was deep. High unemployment for a long time. Many corporate bankruptcies.
Powell has never had the spine to be Volcker in the past. He turned tail and stopped raising rates as soon as the markets had a hissy fit. This time, he may keep his eye on the ball: the mandate of the Fed is to keep price stability, not protect the markets.