Fed Chair Jerome Powell says the central bank is prepared to begin raising interest rates this month to fight inflation despite economic uncertainty after Russia's invasion of Ukraine.



Runaway prices are now a top concern around many kitchen tables in the U.S., and President Biden said in his State of the Union address they're his No. 1 priority.


PRESIDENT JOE BIDEN: Too many families are struggling to keep up with their bills. Inflation is robbing them of gains they thought otherwise they would be able to feel.

PFEIFFER: Fighting inflation is primarily the job of the Federal Reserve, and Fed Chairman Jerome Powell told lawmakers today the central bank is on track to start raising interest rates later this month. NPR's Scott Horsley joins us now. Hi, Scott.

SCOTT HORSLEY, BYLINE: Good afternoon.

PFEIFFER: What is the Fed's game plan here?

HORSLEY: Sacha, the reason prices are climbing so much is we have this mismatch between really strong consumer demand and suppliers who can't keep up. So by raising borrowing costs, the Fed hopes to pour a little cold water on that red-hot demand. The challenge, though, is to cool things off just enough without pushing the economy into a deep freeze. And Fed Chairman Powell says that that balancing act is even more challenging now because of all the uncertainty around Russia's invasion of Ukraine.


JEROME POWELL: Inflation is high - too high - and the committee is committed to using our tools to bring it back down to levels of price stability. But I would also say that given the current situation, we need to move carefully, and we will.

HORSLEY: Powell says policymakers are likely to raise rates by a quarter percentage point when they meet in a couple of weeks, with additional rate hikes to follow in the coming months.

PFEIFFER: Scott, you mentioned Ukraine. What kind of wild card does that pose for the Fed?

HORSLEY: Yeah, it makes the Fed's crystal ball even cloudier than it would otherwise be. You know, Russia is ordinarily a major exporter of oil. And right now, it's having trouble finding buyers, so all the other oil suppliers are charging more. Gasoline prices in the U.S. have jumped about 12 cents a gallon since the invasion. Nobody really knows how high prices are going to go or how long they're going to stay high. Over the course of the year, the Fed thinks inflation will start to settle down. But if that doesn't happen, then the central bank's prepared to act more aggressively with bigger rate hikes or more of them. And, of course, that also increases the risk of slowing economic growth.

PFEIFFER: Scott, as you know, inflation is now the highest it has been in 40 years. That's a problem not just for families' pocketbooks. It's also a political problem for the president. Did the Fed chairman have anything to say about the politics of this?

HORSLEY: You know, Powell usually tries to steer clear of politics, but congressional Republicans have been blaming the Biden administration and especially that $1.9 trillion spending package that was passed last year for supercharging consumer demand and thus pouring gasoline on the inflationary fire. Democrats, for their part, say, look; the spending bill helped drive the fastest economic growth in decades, and it put millions of people back to work. Powell avoided the partisan finger-pointing, but he said, look; these are basically two sides of the same coin. During the pandemic, both Congress and the central bank pumped a ton of money into the economy in hopes of preventing a deeper recession. Powell says that effort mostly worked, but he acknowledged there was some downside.


POWELL: We turned our dials as hard as we could. So did you. The economy did benefit from that. We have the strongest economy in the world now. But no doubt, part of what we did and what Congress did, without naming any particular laws, is also part of the reason why inflation is high.

HORSLEY: Now, a lot of the congressional spending has expired. Now the Fed's begun to dial back its own support for the economy. So there should be a lot less inflationary fuel out there this year than there was last year.

PFEIFFER: We should note that Powell has a kind of asterisk next to his chairman title right now. Explain what that's about.

HORSLEY: Yeah. President Biden has nominated Powell for a second term, and he's also named three new members to the Fed's governing board. All those nominations are currently stalled in a Senate committee over GOP objections to one of the nominees. California Congresswoman Maxine Waters blasted Senate Republicans for stalling tactics at such a sensitive time.


MAXINE WATERS: This will undermine our recovery from the pandemic and place our economy and financial stability at risk. Now is not the moment for obstruction, delay and gamesmanship.

HORSLEY: And we may hear more about that, Sacha, tomorrow, when Powell appears before that very Senate committee.

PFEIFFER: NPR's Scott Horsley. Thank you, Scott.

HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.