Fed likely needs to raise rates higher and possibly faster, Powell tells lawmakers

The remarks were his first since inflation unexpectedly jumped in January and the U.S. government reported an unusually large increase in payroll jobs for that month

The Federal Reserve will likely need to raise interest rates more than expected in response to recent strong data and is prepared to move in larger steps if the "totality" of incoming information suggests tougher measures are needed to control inflation, Fed Chair Jerome Powell told U.S. lawmakers on Tuesday.

"The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated," Mr. Powell said in prepared remarks for a hearing before the Senate Banking Committee.

The remarks were his first since inflation unexpectedly jumped in January and the U.S. government reported an unusually large increase in payroll jobs for that month.

While some of that unexpected economic strength may have been due to warm weather and other seasonal effects, Mr. Powell said the Fed was cognisant it may also be a sign the U.S. central bank needs to do more to temper inflation, perhaps even returning to larger rate increases than the quarter-percentage-point steps officials had been planning to stick with.

"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," Mr. Powell said.

The Fed will hold its next policy meeting on March 21-22, with the release this Friday of the government's monthly jobs report and an inflation report next week now critical in policymakers' judgment about whether they are again slipping behind the inflation curve, or can stick with the more tempered policy planned at their last meeting.

But in either case, Mr. Powell's comments mark a stark acknowledgement that a "disinflationary process" he spoke of repeatedly in a February 1 news conference may not be so smooth.