The Federal Reserve Chair, Jerome Powell, stated on Monday that the United States’ central bank must act ‘expeditiously’ to bring too-high inflation under control, and that it may need to use larger-than-usual interest rate hikes to do so.
‘The labour market is quite strong, and inflation is far too high,’ Powell said at a meeting of the National Association for Business Economics. “There is an evident need to move quickly to return monetary policy to a more neutral level, and then to more restrictive ones if that is what is required to restore price stability.”
‘If we determine that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings,’ he said, ‘we will do so.’
Investors reacted to Powell’s comments by pricing in a better-than-even likelihood of a half-point interest rate hike at the Fed’s May policy meeting. Stocks in the United States extended earlier losses.
Fed policymakers lifted interest rates for the first time in three years last week, signalling that more hikes are on the way. The majority of them expect the short-term policy rate, which has been stuck near zero for two years, to reach 1.9 percent by the end of this year, a pace that might be achieved with quarter-percentage-point rises at each of their next six policy meetings.
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