(Bloomberg) — Federal Reserve officials signaled they remain on track to raise interest rates next month despite uncertainty posed to the global economy by Russia’s invasion of Ukraine.

The risks posed by this conflict have been recognized and oil prices have surged. However, U.S. central banking officials stressed that the U.S. must face the highest U.S. inflation in over 40 years.

“Barring an unexpected turn in the economy, I believe it will be appropriate to move the funds rate up in March and follow with further increases in the coming months,” Cleveland Fed President Loretta Mester said Thursday at an event hosted by Lyons Companies and the University of Delaware. 

“The implications of the unfolding situation in Ukraine for the medium-run economic outlook in the U.S. will also be a consideration in determining the appropriate pace at which to remove accommodation,” she said.

Prior to the Russian invasion, Fed officials had signaled their willingness to increase interest rates at their March 15-16 meeting to combat inflation. However they kept their options open as to how far and how quickly they would move after liftoff.

Mester was among five U.S. central bankers scheduled to speak publicly on Thursday and her sentiment was echoed by Atlanta’s Raphael Bostic, who said that he currently still expects to raise rates in March provided the economy evolves as he anticipates. 

“If the numbers come in close to that I think that can we continue with our liftoff plan,” he said during the Atlanta Fed’s Banking Outlook Conference. “We’ll just have to see where things go. We have witnessed over the last few weeks that both oil and gasoline prices have gone up dramatically. That could have ripples.”

Both economists and traders see the Fed raising rates in March. But, geopolitical risk makes it less likely that the Fed will raise them by half a point. Futures on interest rates show that a quarter point increase in March is well priced in. 

“The current situation is different from past episodes, when geopolitical events led the Fed to delay tightening or ease, because inflation risk has created a stronger and more urgent reason to tighten today than existed in past episodes,” Goldman Sachs Group Inc (NYSE:). In a note addressed to clients, economists Joseph Briggs & David Mericle wrote.

Rising energy prices could cause headline inflation to rise even more, but the Fed usually considers them as a function of household spending. A higher price for oil would impact Americans’ pocketbooks and dampen their demand.

The 1970s shock

The 1970s oil shock will be remembered by policy makers who have to deal with rising inflation. They fear this could lead to a permanent fix.

“Geopolitical events add upside risk to the inflation forecast even as they put some downside risk to the near-term growth forecast,” Mester said. “The ultimate pace at which monetary policy accommodation is removed will need to be data driven and forward looking.”

Earlier on Thursday Richmond Fed chief Thomas Barkin said that “time will tell” whether Ukraine changes the outlook for policy, while affirming his inclination to start normalizing policy to counter price pressures.

Barkin indicated that U.S. relations to Russia’s economy and U.S. bank exposure to it appear limited. Officials will however examine the potential impact on commodity and energy markets to determine if there are any spillovers for the U.S. Barkin also pointed out that the impact of Russia’s 2014 annexed Crimea was minimal.

“So if this evolves like 2014 I don’t think you are going to see much change to the underlying logic that I talked about. This is still uncharted territory. So we will have to see where the world goes.”

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