Fed, Powell remains hawkish: “We will raise rates more than expected”
The Fed is ready for more aggressive moves to fight inflationa “long and bumpy” road that will likely lead to higher interest rates than expected. Jerome Powell returned to his ‘hawkish’ tone paving the way for an interest rate hike at the next meeting of the March 21-22Of 50 basis points, and no more than 25 as expected. After several very large hikes, the Fed raised rates at a slower pace, even returning to its usual one-quarter percentage point hike in February after its last meeting. However, now the situation may change.
“Should the totality of the data indicate that a faster tightening is warranted, we would be ready to ramp up the pace of rate hikes‘ Powell said in his semi-annual hearing before the Banking Commission Senate. “The latest economic data came out stronger than expected, suggesting that the final level of interest rates will likely be higher than previously forecast,” warned the number one of the central bank hinting that it could continue to rise above 5.1%a level at which Fed officials had expected to stop.
“We will continue to make our decisions meeting by meeting, taking into account the mix of incoming data and its implications for the outlook for economic activity and inflation,” Powell said. These are Powell’s first comments since inflation unexpectedly spiked in January and the US government has seen an unusually high increase in employment. “Despite the slowdown in growth, the labor market remains extremely strong,” explained the Fed’s number one, underlining that “The unemployment rate was 3.4% in January, the lowest level since 1969“. Powell said he is aware this could also be a sign that the US central bank needs to do more to contain inflation.”We will do everything possible to achieve our objectives of maximum employment and price stability”he assured.
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