Federal Reserve Fed Chair Jerome Powell tells U.S. lawmakers that tougher measures may be needed to control inflation
Powell's remarks, virtually assuring that Fed officials will project a higher endpoint for the central bank's benchmark overnight interest rate at the upcoming March 21-22 meeting, sparked a quick repricing in bond markets as investors boosted bets that the Fed would approve a half-percentage-point rate hike when they meet in two weeks.
Powell's statement was "surprisingly hawkish," said Michael Brown, a market analyst with TraderX in London. With a 50-basis-point rate hike now in play, Brown said a strong monthly jobs report on Friday would likely lead to "calls for a 6% terminal rate," nearly a percentage point higher than Fed officials had projected as of December.
Powell will testify again on Wednesday before the U.S. House of Representatives Financial Services Committee.The hearing and Powell's testimony honed in on an issue that is now at the center of the Fed's discussions as officials try to determine whether recent data will prove to be a "blip," or end up signaling that inflation remains stickier than thought and warrants a tougher response from the Fed.
While Powell said he thought the Fed's 2% inflation target could still be met without dealing a major blow to the U.S. labor market, he acknowledged on Tuesday that "there will very likely be some softening in labor market conditions."
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