The Federal Reserve is prepared to push ahead this month with its first interest rate increase since 2018, despite a highly uncertain economic outlook as a result of Russia’s invasion of Ukraine, Jay Powell is set to tell US lawmakers on Wednesday.

The Fed chair laid out the US central bank’s case for tightening monetary policy in an environment of heightened geopolitical tensions, in prepared remarks to be delivered to the House Financial Services Committee.

Powell will highlight the broad-based employment gains that have accrued over the past six months in what has been an “extremely tight” labour market that has led to rapidly rising wages. He will also call attention to consumer price increases “spreading to a broader” range of goods and services” that have driven inflation up to the fastest pace in 40 years.

“With inflation well above 2 per cent and a strong labour market, we expect it will be appropriate to raise the target range for the federal funds rate at our meeting later this month,” he is set to say.

The positive assessment of the US economy comes despite a sharp escalation in Russia’s attacks on Ukraine, with the Kremlin stepping up bombardments on the country’s biggest cities.

Powell said the near-term economic implications from the invasion and the economic sanctions levied by the US and its western allies — which US President Joe Biden called “powerful” at his first State of the Union address on Tuesday — remain “highly uncertain”, but vowed to monitor the situation closely.

“Making appropriate monetary policy in this environment requires a recognition that the economy evolves in unexpected ways,” Powell will say. “We will need to be nimble in responding to incoming data and the evolving outlook.”

Markets have in recent days dialled back expectations for how aggressively the Fed may raise interest rates this year in light of Russia’s invasion of Ukraine, with traders now pricing in five quarter-point adjustments over the course of 2022 as opposed to six.

The Ukraine war has clouded the growth outlook, but is also forecast to exacerbate inflation, potentially forcing the Fed to be more aggressive later this year than markets currently anticipate. Energy prices have surged higher since Russia attacked, with Brent crude climbing to its highest level in eight years, at roughly $111 a barrel.

While the Fed still expects inflation to moderate this year, Powell alluded to the potential need for the central bank to recalibrate if that does not occur.

“We are attentive to the risks of potential further upward pressure on inflation expectations and inflation itself from a number of factors,” he will tell lawmakers.