Treasury Secretary Janet YellenAlthough the U.S. financial sector is considered to be in good standing, some items are becoming more costly due to Russia’s invasions of Ukraine and China’s Covid-19 lockdowns.

Yellen will be testifying before the Senate Banking Committee Tuesday. She said that she and top financial regulators would not be surprised if market turbulence continues into the summer.

Yellen warned that “there is the potential of continued volatility, unevenness in global growth as countries continue dealing with the pandemic.” in her written testimony, which was released by the committee ahead of the hearing.

She continued, “Russian’s unprovoked invasion in Ukraine has increased economic uncertainty.” While the U.S.’s financial system continues to operate in an orderly way, some assets have remained highly valued compared to their historical value.

U.S. stock markets fell on Monday again as the broad S&P 500 indexThe longest streak of losses since mid-2011 was over. It reached a record one-year low due to rising interest rates that fueled fears of tighter monetary policies.

Yellen will be giving a testimony on the Financial Stability Oversight, despite the Russian attack on Ukraine. Council’s 2021 annual reportThe Treasury Department published this document in December.

Yellen explained that council members are interested in helping banks understand the climate and other risks they face through improved data and more disclosure from publicly traded corporations.

She also mentioned the studies of council on digital assets which were described by her as both full of risk and opportunity.

Digital assets may offer opportunities for innovation and efficiency. She warned that “digital assets can pose risks for the financial system.”

According to her, the “regulatory gap” and risks of the new council were identified by the 2008 financial crisis.

The report 2021, which gives valuable insights into the health and finances of Treasury and the Securities and Exchange Commission (Federal Reserve), arrived before Moscow invaded and Beijing cracked down on Covid cases.

Both these developments lead to supply chain problems as war in Ukraine raises the price of oil, corn and wheat, and China’s rigid lockdowns affect manufacturers and create labor shortages.

On Dec. 17, the Treasury Department presented the 2021 Report. Regulators pointed out that equity markets had reached record highs due in part to the “low” interest rate.

Since then, the S&P 500 is down almost 13%, the per-barrel price of oilIt has risen by approximately $30 and is now at the yield on the 10-year Treasury noteThe increase has been north at 3.2%. This is the highest point since November 2018.

The macroeconomic environment has changed dramatically since Russia’s aggression on Ukraine in December. Inflation fears are now higher than ever.

FSOC may have made some sections of its report look stale due to the events in the first quarter 2022, but inflation worries remain constant.

Investors now fear more of a depression in the latter part 2022/early 2023. They believe that Fed should be more cautious when raising interest rates. This is to make sure economic activity doesn’t suffer. It also needs to lower inflation.

The Banking Committee Chair Sen. Sherrod brown, D-Ohio and ranking member Senator Pat Toomey. will probably question Yellen about her recent thoughts regarding inflation, the global economy and supply chain resilience.