Federal Reserve Chairman Jerome PowellThis week, the task is to inform Congress that the central bank will do more to curb inflation than markets anticipate.

There are many fears about the Russian invasion of UkraineWall Street quietly lowered its expectations of Fed action, causing financial turmoil.

What markets were expecting the Fed to raise interest rates up to seven timesIn 2022, the latest pricing shows only five changes. This would mean that the Fed could raise its benchmark short-term borrowing interest rate by approximately 125 basis points or range from 1.25%-1.5%.

Powell is faced with a difficult decision because of shifting winds. He explained during congressional testimony for two days that Powell’s institution was committed to controlling inflation and being aware of geopolitical instability.

He must thread a very thin needle. Mark Zandi (chief economist, Moody’s Analytics), said that the balance act would be challenging. He seems to be able to accept the uncertainty this creates, given the fact that there could be many paths for the Russian invasion. Each one is darker than the others. His comments will reinforce his point that it may make more sense for the Fed in times of increased uncertainty to be cautious when enacting policies.

Markets were expecting that the Federal Open Market Committee, which is responsible for policymaking, would approve 25-basis point increases at each of its remaining seven meetings. Even the strong preference was for the 50-basis point first move at the March 15-16 meeting.

Russia’s aggression has taken this off the table for now.

Peter Boockvar is the chief investment officer of Bleakley Advisory Group. He stated that “Playing it by ear” would be his most effective message. He could then sort of glide around the extremely difficult situation he is currently in. We’re going to deal with inflation, but — and that ‘but’ is let’s see how the economy goes from here.”

Most economists predict solid growth in 2018, if not more than that of 2021, the strongest year since 1984. In December, Fed officials projected GDP to accelerate at a 4% paceBy 2022

However, unrelenting inflation, at its fastest level in 40 yearsThis, together with the potential that Russia-Ukraine could lead to higher inflation and further complications in supply chains adds another dimension to Fed policy outlook.

Boockvar stated that “We are entering a period deflation”, referring to lower growth and higher inflation. “The real question is whether or not?” [Powell]Do you focus on the “stag” or the “flation?” Based on history, the Fed is focused on growth.

However, other economists disagree.

A note for clients on Sunday Goldman Sachs said “very high inflation”The year should “make an easy case for” seven rate rises. Bank of America hasn’t changed its seven-move forecast, but Citigroup economist Andrew Hollenhorst said Tuesday that the market was “a little too quick to price out the potential for 50.” [basis point” hike at this month’s FOMC meeting.

Nonetheless, as of Tuesday noontime, the market had completely taken a half-percentage-point hike off the table and in fact assigned a tiny possibility to no move at all, according to the CME Group. Futures pricing can be volatile, so the probabilities could swing back if inflation slows or the Ukraine situation is resolved.

Powell, delivering his mandated semiannual update to a House panel Wednesday and then to a Senate committee Thursday, will have to address a wide range of views on where it should be at a critical time for monetary policy.

“We think Powell will emphasize that amid heightened geopolitical uncertainty the Fed remains focused on its macro objectives and will continue to move ahead with policy normalization with a view to bringing inflation back towards target while sustaining employment,” Krishna Guha, head of central bank policy strategy for Evercore ISI.

“We think he will acknowledge that the Russia Ukraine crisis and its stagflationary impulse from higher energy prices (inflation higher, growth lower) creates additional challenges for policy,” Guha added.