Federal Reserve Chair Jerome Powell delivered his highly anticipated semiannual monetary policy testimony before the Senate Banking Committee on Tuesday.
Citing stubbornly elevated inflation and stronger than expected economic data, Powell told lawmakers the “ultimate level of interest rates is likely to be higher than previously anticipated.”
Powell also said the Fed would be prepared to reaccelerate the pace of rate hikes if the totality of incoming data were to indicate that faster tightening is warranted.
Additionally, the Fed chief reiterated the central bank will likely need to maintain a restrictive stance of monetary policy for “some time” in order to restore price stability.
“The historical record cautions strongly against prematurely loosening policy,” Powell said. “We will stay the course until the job is done.”
The testimony by Powell comes as the Fed has raised interest rates by 4.5 percentage points over the past year in an effort to combat elevated inflation.
The Fed slowed the pace of rate hikes over its past two meetings, raising rates by 25 basis points in early February after increasing rates by 50 basis points in December and by 75 basis points in November.
Powell noted the Fed continues to anticipate that ongoing rate hikes will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.
“Although inflation has been moderating in recent months, the process of getting inflation back down to 2 percent has a long way to go and is likely to be bumpy,” Powell said.
Powell acknowledged the impacts the rate hikes have on communities, families, and businesses across the country but stressed the Fed will do “everything we can” to achieve its dual goals of maximum employment and price stability.
The Fed’s next monetary policy meeting is scheduled for March 21-22, with CME Group’s FedWatch Tool currently indicating a 45.7 percent chance of another 25 basis point rate increase and a 54.3 percent chance of 50 basis point rate hike.
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