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Powell discusses the urgent need for crypto regulations to prevent any leakages in the sanctions levied on Russia. He also talks about the potential measures ahead to control inflation while keeping the Russia-Ukraine war situation in mind.
One of the most important things to watch out for is what shall be the Fed’s stand in the current Russia-Ukraine situation. On Wednesday, March 2, Fed Chairman Jerome Powell said that there’s a growing need for crypto regulation amid the ongoing war.
Crypto Regulation Needed amid Russia-Ukraine War
Powell also demanded Congressional action in this regarding speaking before the House Financial Services Committee. There’s a growing fear among NATO lawmakers that Russia might use crypto to circumvent the financial sanctions. Speaking on this matter, Powell said that the recent events in Ukraine have “underscored the need for Congressional action on digital finance, including cryptocurrencies.”
He further added: “We have this burgeoning industry which has many parts to it, and there isn’t in place the kind of regulatory framework that needs to be there”.
Following Russia’s invasion of Ukraine last week, the US and EU have put strong sanctions on Russia. The Asian military giant has been choked from the globally used SWIFT payment network, a move that seeks to make Russia go dry of money to fund its war. In this course, Russia’s largest lender Sberbank also decided to withdraw operations from the EU.
Following these sanctions, the Russian Ruble has also collapsed heavily losing 30% against USD in a week. Thus, crypto trading volumes in the Russian ruble have also shot up 3x over the last week. The EU is looking into how to prevent Russia from using crypto to bypass the sanctions.
Powell Calls Ukraine Impact ‘Highly Uncertain’
Apart from crypto regulations, Powell talked about how the Russia-Ukraine war can potentially impact the American economy. The Fed has planned to raise interest rates in order to take the rising inflation in control.
Jerome Powell said that the interest rate hikes shall come as planned. However, he also added that the Russia-Ukraine war has added major uncertainty to the outlook. The Fed chief also acknowledged the “tremendous hardship” that the Russian-Ukraine crisis is causing. He added:
“The implications for the US economy are highly uncertain, and we will be monitoring the situation closely. The near-term effects on the US economy of the invasion of Ukraine, the ongoing war, the sanctions, and of events to come, remain highly uncertain. 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.”
The Fed Chairman also showed his desire to control inflation. However, he added that the Fed will conduct a careful assessment in wake of the war situation. The likely path of the interest rate hikes will be increments of a quarter percentage points. But the Fed can go more aggressive if the inflation situation worsens.
“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.