US interest rates to rise more than expected: Federal Reserve Chair Jerome Powell
If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes, he said in prepared remarks released ahead of his appearance at a US Senate hearing.
US interest rates are likely to be raised at a higher level than was previously anticipated due to January data that came in stronger than recent trends expected, Federal Reserve Chair Jerome Powell said on Tuesday.
"If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes," he said in prepared remarks released ahead of his appearance at a US Senate hearing.
The strong employment, consumer spending, manufacturing production and inflation figures in January indicated a partial reversal of earlier softening trends, was and according to Powell it is likely due to "unseasonably warm weather in January," Powell said.
Fed has raised its interest rate by 4.5 percentage points over the last year, as the Fed has contended with inflation that remains stubbornly above its long-term target of 2.0 per cent. "We will stay the course until the job is done," Powell said in the statement.
The speech comes at a time when markets seem more or less optimistic that the central bank can bring down inflation without impacting the economy much. Stocks were slightly negative while Treasury yields jumped after Powell’s remarks were released.
Powell highlighted the fact that the current trend shows that the Fed’s inflation-fighting job is not over.
“We have covered a lot of ground, and the full effects of our tightening so far are yet to be felt. Even so, we have more work to do,” he said. The Fed has raised its benchmark fund rate eight times over the past year to its current targeted level between 4.5 per cent - 4.75 per cent.
Powell noted some progress on inflation for areas such as housing. However, he also stressed on the fact that “there is little sign of disinflation” when it comes to the important category of services spending excluding housing, food and energy. Markets mostly expect the Fed to enact a second consecutive quarter-point, or 25 basis points, rate increase at the Federal Open Market Committee meeting later this month.
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