Powell says U.S. Fed is ready to raise rates faster if needed

U.S. Fed Chair Jerome Powell said the central bank will take the “necessary steps” to get inflation down even if that means increasing interest rates more rapidly than currently anticipated and eventually to levels that slow the broader economy.

Federal Reserve Chair Jerome Powell said the central bank will take the “necessary steps” to get inflation down even if that means increasing interest rates more rapidly than currently anticipated and eventually to levels that slow the broader economy.

Policy makers raised the benchmark lending rate by a quarter point at their meeting last week, the first increase since December 2018, and signaled six more hikes of that magnitude this year, based on the median projection. The rate is anticipated to reach 2.8 per cent in 2023, beyond the so-called neutral rate of about 2.4 per cent that neither speeds up nor slows down economic activity.

“If we conclude 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, we will do so,” Powell said Monday in prepared remarks to the National Association for Business Economics. “And if we determine that we need to tighten beyond common measures of neutral and into a more restrictive stance, we will do that as well.”

Powell -- who reiterated and elaborated on many of his key comments from last week’s press conference -- said Russia’s invasion of Ukraine is aggravating inflation pressures by boosting prices on food, energy, and other commodities “at a time of already too high inflation.”

He said central banks typically look through event-driven commodity price shocks. But this time won’t necessarily be typical.