The potential ripple effects of Russia's invasion of Ukraine and the ensuing wave of crushing sanctions jolted markets, raising new questions about a global economic slowdown. We chatted Monday with Cecilia Rouse, chair of the White House Council of Economic Advisers, who warned that rising gasoline prices pose the biggest risk for U.S. economic momentum as the West piles on sanctions to punish the Kremlin. "The economic risks will hinge on the length of this war. And the more quickly it is resolved, then the smaller the impacts," Rouse said in an interview with POLITICO's Women Rule. "The longer it goes on, the deeper the uncertainty. So I would say that this has definitely clouded the outlook." The invasion and the sanctions will likely drive up energy costs, raising prices at the pump for U.S. consumers at a time when inflation is already hovering near four-decade highs. Some economists warn that could crimp consumer demand and weigh down economic growth this year, complicating the path for policymakers already grappling with broadening price pressures. Market gyrations continued Monday as investors tried to digest the latest developments, sending stocks swinging up and down. The S&P 500 finished 0.2 percent lower, after being down as much as 1.6 percent, while the Dow Jones Industrial Average fell 0.5 percent and the Nasdaq rose 0.4 percent, recouping earlier losses. What could it mean for the Fed? We'll hear more on that this week from Federal Reserve Chair Jay Powell, who is set to testify on Capitol Hill tomorrow and Thursday. Jason Furman, who was CEA chair during the Obama administration, told us on Monday that he expects the U.S. central bank to mostly look beyond the news related to Ukraine, "not to raise rates more because it triggers some temporary extra inflation but not to hold off on rate increases because there's not a lot of… impact on the U.S. economy, especially on the horizon of a year, from an event like this." He said there's a small risk that higher inflation exacerbated by an oil price spike could lead to a more persistent increase in prices, if it changes expectations about future inflation. "That's more of a risk now than the last time we had high oil prices from 2011 to 2014. That being said, I don't think that's a huge risk," he said, adding that oil prices are still well below where they were the last two times prices peaked over the last 15 years. Sanctions are working — Rouse also said the administration's economic statecraft is having its intended effect. "The Russian Central Bank has increased, it's doubled the interest rate it is charging, which is its attempts to support the ruble," she said. "And much of this is not only the fact that we have frozen their reserves, but other countries as well. And so, you know, the noose is tightening, in terms of — Putin just doesn't have access to the resources he was counting on." The Russian ruble nosedived on Monday, slumping as much as 30 percent, as the country's central bank sought to defend the currency, lifting its key interest rate to 20 percent and imposing some capital controls. Will China help fund Moscow's war chest? A key question is whether Beijing will step in to help. Our colleague Stuart Lau, Politico's EU-China correspondent, writes: "While Beijing still wants to count on Moscow as a long-term strategic partner to fend off America's global influence, it will no doubt be wary of the international reaction if it opts for measures that could be interpreted as an endorsement of Putin's aggression, according to experts." So far, Chinese policymakers have focused less on their ability to help Russia than providing general commentary on the impact of sanctions on the Russian and European economies, Stuart writes. And the People's Bank of China, the Chinese central bank, hasn't given any clues yet about the status of Russian foreign exchange reserves or the currency swap line. IT'S TUESDAY — March is here. Only three weeks to the official start to spring. The bar for good news is low, folks! Have tips or story ideas? You know what to do: kdavidson@politico.com, aweaver@politico.com, or on Twitter @katedavidson or @aubreeeweaver.
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