Why aren’t Fed officials handling the war between Israel and Hamas the way they dealt with Ukraine?


when War broke out in Ukraine Last year, Federal Reserve officials were quick to talk about it.

“Let me comment on what I think is on everyone’s mind today: Russia’s attack on Ukraine,” Fed Governor Chris Waller said on February 24, 2022, hours after Russia invaded Ukraine.

“There are clearly people in harm’s way and we must not lose sight of them. It is too early to judge how this conflict will impact the world, or the global economy, and what the ramifications will be for the U.S. economy,” Waller said.

Now, there it is Another war The current situation between Israel and Hamas.

However, in Lawler’s first public appearance after Hamas’s invasion of Israel last weekend, he did not acknowledge the incident The tragedies that unfolded.

In his second appearance since the outbreak of war, he said he did not believe there was a strong chance of harm to the US economy unless there was a significant spillover effect that weakened business and consumer sentiment.

Fed Vice Chairs Michael Barr and Philip Jefferson, Fed Governor Michel Bowman and Dallas Fed President Lori Logan made public statements last week. No one mentioned the war in Israel.

Emma Jones, a Fed spokeswoman, declined to comment on why many Fed officials, who in the past have moved quickly to acknowledge the war in Ukraine, have not addressed the war in Israel.

That shouldn’t be the case, James Dorn, a Fed policy expert and senior fellow at the libertarian-leaning Cato Institute, told CNN. “The Fed is addressing climate change and diversity, and you think they have to address the seriousness of what’s happening in the Middle East,” he said.

However, there are some Fed officials who are starting to talk about this, albeit only when asked questions.

Fed officials see little immediate threat to the US economy

Atlanta Federal Reserve Bank President Rafael Bostic was the first to speak about the war, at the American Bankers Association’s annual conference last Tuesday.

“My heart goes out to everyone who has been negatively impacted by this situation,” he said, adding that “it’s really upsetting.”

Regarding how the conflict will impact both the United States and the global economy, Bostic said: “This is just another new, unexpected thing that will make everyone have to rethink where our markets are going to be, and where our partners are going.” He is.”

During a moderated discussion at Minot State University in North Dakota last week, Minneapolis Fed President Neel Kashkari did not address the conflict until the end.

“The primary mechanism through which geopolitical events are dealt with – whether it is Russia’s invasion of Ukraine, or Hamas’ attack on IsraelHe added: “The impact on the economy… is through commodity markets, through oil prices, first and foremost, but through other commodity markets as well.”

He added: “We saw huge price movements when Russia invaded Ukraine, and so far more muted movements around what is happening in Israel.”

Federal Reserve officials don’t talk about the war between Israel and Hamas unless they’re asked about it. – Drago/Bloomberg/Getty Images

Kashkari described the conflict as a “human tragedy.”

Boston Fed President Susan Collins said that “given the size of the US economy,” it is generally more resilient to global shocks.

“Many of the impacts of the horrific events and what we are experiencing right now go beyond the economic impacts,” Collins said during an event hosted by Wellesley College last Wednesday. However, the conflict is something the Fed will take into account in its models that help officials make policy decisions, she added.

Philadelphia Federal Reserve Bank President Patrick Harker said the US economy can still achieve a goal Soft landingThis is a scenario in which inflation declines without pushing the economy into recession.

“Now there’s a big warning that we’ve been hit again and again — the proverbial black swans that come out of left field that we don’t expect,” he said Friday at an event hosted by the Delaware State Chamber. commerce.

He noted that the war in Ukraine was one of those wars, and now “this terrible situation that we are witnessing in Israel and the Middle East more broadly.”

Harker said it was unclear whether the war between Israel and Hamas would have a “broader” impact on the global economy.

Possible economic repercussions of the war

While it may be true that a war between Israel and Hamas alone may not mean much for the US economy, there is a significant and growing risk that it will escalate into war. A multinational war that would likely include IranLebanon and Syria In light of the recent tensions Among those nations.

JPMorgan Chase CEO Jamie Dimon isn’t taking this lightly.

He said in statements to the bank: “Now may be the most dangerous time the world has seen in decades.” Q3 earnings call last week. He said the war “could have far-reaching effects on energy and food markets, global trade and geopolitical relations.”

Fed officials “have to think about the economic implications of this,” said Dorn of the Cato Institute.

One threat to the economy is that more countries – including the United States – are imposing a stricter embargo on Iranian oil. US sanctions on Iran are supposed to prevent the sale of Iranian oil in the United States, but traders have been able to find loopholes to get around them in the past.

However, Iran’s influence on the global oil market is limited. According to Kpler data, the country exported only about 1.4 million barrels per day of crude oil in the third quarter, representing a maximum of 1.4% of global supply.

In comparison, Russia was the world The second largest oil producer In 2021, according to data from Rystad Energy. This is why there was an immediate rise in gas prices around the world after a large number of countries banned imports of Russian oil following the invasion of Ukraine.

That’s likely why more Fed officials were quick to acknowledge the war in Ukraine, Dorn said. But there’s more to it than that, he says.

“This is a more emotional thing for a lot of people,” he said, referring to the war in Israel and Gaza, while Ukraine had a lot of bipartisan support initially. “I don’t think the Fed wants to appear to be taking sides,” Dorn added, but he said Fed officials could easily talk about the matter without appearing biased.

There is also a greater risk that a multinational war could spill over into the Strait of Hormuz, a narrow waterway off Iran’s southern border through which it passes. 37% of global oil exports transported by sea Travel every day.

Gregory Daco, chief economist at EY-Parthenon, said any rise in oil prices resulting from the war “will likely destroy demand even more than it did in 2022 when the economy was fiscally stimulated.”

Rising gas prices, which will likely prompt consumers to cut back on spending in other areas, coupled with the impact of all the Fed’s interest rate hikes since March 2022, may prompt the central bank to rethink further rate hikes, Daco said. Completely.

CNN’s Anna Cuban and Brian Mina contributed to this story.

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