Federal Reserve Chairman Jerome Powell declares that the Fed is ready to accelerate its rate hikes if inflationary pressures do not show signs of easing in the near term.
In this context, in his appearance before Congress, the US banker has revealed that the reversal recently observed in the trend towards moderation of inflation suggests that rates will rise to a higher level than expected.
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“The latest economic data has been stronger than expectedsuggesting that the final level of interest rates is likely to be higher than previously anticipated,” Powell said.
After Powell’s first appearance of the two that will take place between this Tuesday and tomorrow, The New York stock markets react downwards due to fears of more rate increases. The tech-heavy Nasdaq, which opened the session higher, is down about 1% after Powell’s comments. The president assures that “they are prepared to accelerate the pace of rate hikes.”
In his speech, Powell has expressed concern that the January employment dataconsumer spending, manufacturing production and inflation have partly reversed the trends towards moderation shown just a month ago.
The Wall Street Journal. Nick Timiraos
While this reversal partly reflects unusually warm January weather across much of the country, the US central banker has warned that the breadth of this reversal, along with revisions from the previous quarter, “suggests that inflationary pressures are being higher than expected at the time of the previous Federal Open Market Committee (FOMC) meeting“.
“We have covered a lot of ground, and the full effects of our hardening have thus far yet to be felt.“, has recognized the president of the Fed, for whom there is still more work to do.
Thus, continues to anticipate that continued increases in the target range for the federal funds rate will be appropriate to achieve a monetary policy stance that is tight enough to return inflation to 2% over timewhile the Fed continues with the process of significantly reducing the size of its balance sheet.
“We have covered a lot of ground, and the full effects of our tightening have so far yet to be felt.”
However, has warned that it will take time for the full effects of monetary tightening to materializeespecially on inflation, so the Fed Committee will continue to make its monetary policy decisions on a “meeting by meeting” basis, taking into account the totality of incoming data and its implications for the outlook for economic activity and inflation.
“Everything we do is in service of our public mission. We at the Federal Reserve will do everything we can to achieve our goals of price stability and maximum employment.“, he added.
