Powell signals Fed could be more aggressive in lifting interest rates

21 March 2022 - 21:20Federal Reserve chair Jerome Powell speaks during the National Association of Business Economics policy conference in Washington, DC the US, March 21 2022. Picture: VALERIE PLESCH/BLOOMBERG

In particular, he added,"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 repeated on Monday that the Fed's reductions to its massive balance sheet could start by May, a process that could further tighten financial conditions.

Speaking on Friday, Fed governor Chris Waller said he would favour a series of half-percentage point rate increases to have a quicker impact on inflation. Adding to the pressure on prices, Russia's war in Ukraine is pushing up the cost of oil, threatening to move inflation even higher. The US, now the world's biggest oil producer, is better able to withstand an oil shock now than in the 1970s, Powell noted.

"As we set policy, we will be looking to actual progress on these issues and not assuming significant near-term supply-side relief," Powell said on Monday. Policymakers began this year expecting inflation would peak this quarter and cool in the second half of the year.

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