Washington, DC – This morning, Congressman Frank Lucas (OK-03) joined his colleagues on the House Committee on Financial Services for a hearing with Federal Reserve Chairman Jerome Powell on the state of the U.S. economy.

Lucas questioned Federal Reserve Chairman Powell on the impact Russia’s invasion of Ukraine will have on commodity prices, as well as the importance of the U.S. financial system to have reliable and liquid markets.

Click to watch Lucas’ Q&A

Excerpts

On commodity prices

Lucas: As Congresswoman Wagner touched on, the price of oil has continued to climb during the past year to its highest level in more than seven years. We now see international banks appropriately shunning Russian oil, even without energy sanctions. 

Can you describe the range of different scenarios the Fed projections paint in regard to this? And along with that, how do you see this potentially impacting the already rampant inflation issues?

Powell: Well, obviously, the price of oil depends on events that haven’t occurred yet. It really depends on where this goes going forward. We have seen prices move up, including just in the last couple of days, and they moved up quite substantially since you go back three months before this incident kind of began, prices are up quite a bit. The effects are going to be passed through into gas prices, into lower economic activity and into inflation, headline inflation. And the larger the increase, the more the larger the effect. But the question then will become, that’s a price level change. Is that going to lead to repeated inflation increases at that time? And that is not necessarily the case. And, of course, we would use our tools to make sure that it’s not the case.

Lucas: And, of course, representing the constituency I do, which is both oil and gas and production agriculture, we take very careful note of what those actions will affect, how they will affect world crude oil prices and, of course, the Ukraine being a very historic major grain producer. My wheat people also are prepared to step up and match that, but it all underscores, I suppose, the increased energy production in the United States and supporting policies that will not penalize or drive capital away from domestic oil and gas production.That’s more of an editorial on my part, Mr. Chairman. But I note that we stand ready in this country to replace resources that may not be available or affordable for the rest of the world, and we just need a little incentive and encouragement from this side of the room to utilize those things.

On importance of liquidity

Lucas: The economy is currently operating and what I think we’d all describe is the very least massive economic uncertainty. And when you deal with this 40-year inflation and supply chain issues and the COVID-related issues, hopefully we’re in that final stage. 

Can you elaborate on how critical it is for the health of the economic system to be reliable and to maintain liquid markets so we can navigate through all of whatever lies ahead of us?

Powell: So, I would say our markets have been functioning well. There’s a great deal of liquidity out there. We have now between our swap lines and our repo-facility for other foreign central banks and our standing repo-facility in the Treasury market, we have institutionalized liquidity provision. And I think just the knowledge that that is there will help support good market function which, despite all this volatility we still have.

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