Powell Signals Higher Rates as Lawmakers Press Him on Bank Rules

Federal Reserve Chair Jerome Powell said policymakers expect interest rates will need to move higher to reduce US growth and contain price pressures, even though they held rates steady at their meeting last week.

“Earlier in the process, speed was very important,” Powell said Wednesday in testimony before the House Financial Services Committee, referring to the pace at which officials lifted rates over the past year. “It is not very important now.”

It may make sense to continue moving rates higher in the coming months, but at a more moderate pace, Powell said in response to lawmakers’ questions about the Fed’s plans. The timing of additional hikes will be based on incoming data, he said in his opening statement.

Powell Signals Higher Rates as Lawmakers Press Him on Bank Rules

Jerome Powell, chairman of the US Federal Reserve

US stocks fell following Powell’s rates warning, thwarting bets that the US central bank was nearing the end of its tightening cycle. Treasury yields remained higher on the day and traders edged slightly upward the probability that the Fed will lift its policy rate by a quarter point next month.

The Federal Open Market Committee paused its series of interest-rate hikes last week for the first time in 15 months, leaving rates in a range of 5% to 5.25%. But Fed officials estimated rates would rise to 5.6% by the end of the year, according to their median projection, implying two additional quarter-point hikes following surprisingly persistent inflation and labor-market strength.

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