Dive Brief:

• The Biden administration redoubled economic sanctions against Russia and announced a new deal Friday that aims to curb Europe's reliance on natural gas imports from the country. 
• A U.S. task force will work to supply Europe with an additional 15 billion cubic meters of natural gas this year, "with expected increases going forward," according to a statement Friday.
• The U.S. Treasury on Thursday announced sanctions denying 48 Russian defense companies access to western technology and financing. The Treasury also imposed restrictions on 328 members of the Russian State Duma and the head of Sberbank, which it said is Russia’s largest financial institution.

Dive Insight:

Since the beginning of the invasion on Feb. 24, the U.S. and European countries have sought to punish the Kremlin through economic sanctions, export controls and other measures. They have shut down the Nord Stream 2 pipeline and targeted Russia’s biggest companies and its financial sector.

The U.S. will export more natural gas to Europe and secure additional supply through agreements with allied countries in order to meet the 15 billion cubic meters goal, which represents approximately a third of Europe's gas imports from Russia in 2021. The U.S. has close to doubled its natural gas exports to Europe over the past three to four months, a senior administration official said. 

Natural gas prices have already been on the rise, and some experts have said higher costs associated with the crisis in Ukraine could lead to a spike in the use of coal in the U.S.

Russia's invasion "poses fresh risks to global supply chains, mainly because of soaring energy prices and suspended trade routes, but also because of related risks: input material and component shortages, higher priced transportation and key commodities and disrupted cargo flows," Moody’s said in a report last week.

Noting that oil prices have surged since the invasion began, Moody’s said, "the rise in fuel and metals prices will continue to exacerbate supply-side cost pressures. Renewed production delays and freight issues will limit output capacity." Moody’s reduced its estimate for U.S. growth this year 0.3 percentage point to 4.2%.

"The myriad risks to supply chain normalization come just as they were beginning to recover from COVID-19," Moody’s said, flagging a setback for auto and semiconductor manufacturers.

Supply chain disruptions will probably ease in the coming months, helping correct a supply-demand imbalance and slow inflation, Federal Reserve Chair Jerome Powell said at a March 16 press conference after a meeting of policymakers.

Fed officials forecast that their preferred inflation measure — the core personal consumption expenditures (PCE) price index — will decline to 4.1% by December from a 38-year high of 5.2% in January.

The Fed, citing price pressures, raised the federal funds rate on March 16 for the first time since 2018. It has set an inflation target of 2%.

For several months until November 2021, Powell and other Fed officials predicted that crimps in supply chains would ease, helping to rein in a "transitory" acceleration in price gains. During the March 16 press conference, Powell acknowledged that the forecast was erroneous.

"If we knew now that these supply blockages, really, and the inflation resulting from them in collision with, you know, very strong demand – if we knew that that was what was going to happen, then in hindsight, yes, it would have been appropriate to move earlier" in raising the benchmark interest rate, Powell said.