Powell backs front-loading Fed rate hikes, says half-point on table

U.S. Fed Chair Jerome Powell blessed a half-point interest-rate hike next month and signaled support for further aggressive tightening to curb inflation by noting that he saw merit in “front-end loading” policy moves.

Federal Reserve Chair Jerome Powell blessed a half-point interest-rate hike next month and signaled support for further aggressive tightening to curb inflation by noting that he saw merit in “front-end loading” policy moves.

“I would say that 50 basis points will be on the table for the May meeting,” Powell told an IMF-hosted panel on Thursday in Washington that he shared with European Central Bank President Christine Lagarde and other officials. “We really are committed to using our tools to get 2 per cent inflation back,” he said, referring to the Fed’s target for annual price increases.

Interest-rate futures are fully pricing a half-point move in the benchmark lending rate when U.S. central bankers meet May 3-4 and another half-point hike is fully priced for June. Investors are betting on a third half-point increase for July and Powell’s St. Louis Fed colleague James Bullard has opened a debate about doing a more aggressive 75 basis-point increase if needed.

Powell said “there’s something in the idea of front-end loading” moves if appropriate, “so that points in the direction of 50 basis points being on the table.” He declined to comment on market pricing but did note that minutes of the Fed’s March meeting showed that many officials backed one or more half-point rate increases to cool prices.

Central bankers are grappling with some of the highest inflation rates since the 1980s that are being further pressured as Russia’s invasion of Ukraine boosts food and energy prices and China’s coronavirus lockdowns tangles supply chains anew.