Powell says ‘No decision’ has been made on speeding up rate hikes

(Bloomberg) – Federal Reserve Chairman Jerome Powell stressed that policymakers are still undecided on the size of a rate hike later this month and said it will depend on upcoming data on employment and inflation.

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“We haven’t made any decisions about the March meeting,” Powell told the House Financial Services committee on Wednesday during the second day of testimony before Congress.

The Fed chief repeated his message from Tuesday that the US central bank is likely to raise interest rates higher than previously anticipated and that it could move at a faster pace if economic data continues. hot. But on Wednesday, he diverged slightly from his prepared remarks to confirm the claim by adding that “no decision” has been made.

“If – and I stress that no decision has been made on this matter – but if all the data indicate that a faster tightening is needed, then we will be prepared to increase the pace of rate hikes,” he said. ” he said.

“We’re going to have some important data coming in,” he said, referring to the latest U.S. job openings data, released as the hearing begins on Wednesday, as well as the jobs report. February jobs on Friday and consumer price data due for release on March 14.

Fed officials will meet March 21-22, when they will update their quarterly economic forecasts. In December, they saw interest rates peak around 5.1% this year, according to their median forecast.

Investors have been betting more that the central bank could raise rates by 50 basis points when it meets later this month rather than continuing the quarter-point pace from its previous meeting. They also see the Fed raising rates, predicting that the Fed’s policy benchmark will peak around 5.6% this year, up from 5.5% on Monday.

The Fed began aggressively raising rates a year ago, raising its target for the base rate to around 4.5% to 4.75% in February, as it adjusted its pace of action to partially increase it. four percentage points. That follows a half-point rally in December after four consecutive moves of a massive 75 basis points.

“Decelerating the pace of rate hikes this year is one way for us to see more of those effects as they emerge,” Powell said, referring to the impact of the delay in policy tightening that has been introduced. go out.

The central bank’s goal is to reduce demand for goods and services to cool the rate of price increases, but the US economy has been remarkably resilient to higher interest rates. Payrolls rose more than 1 million in the three months to January, and recent inflation and consumption data suggest persistent price pressures.

The Fed’s preferred inflation gauge unexpectedly accelerated in January and remained well above the central bank’s 2% target. The personal consumption expenditures price index rose 5.4% from a year earlier and the core index rose 4.7%, both marking a rebound after several months of decline.

“Inflation is falling but remains very high,” Powell said. “Part of the high inflation we are experiencing is most likely related to the very tight labor market.”

–With support from Catarina Saraiva and Erik Wasson.

(The update includes Powell’s comment in the ninth paragraph.)

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