Jerome Powell, the chairman of the Federal Reserve, emphasized on Wednesday that the central bank’s policymakers still need to determine the size of the interest rate increase they will impose at their next meeting in two weeks to combat excessive inflation.
In his second day of testimony this week on Capitol Hill, Powell said: “We would be prepared to increase the pace of rate hikes if — and I repeat that no judgment has been made on this — if the totality of the data were to indicate that faster tightening is appropriate.
Some economists and Wall Street traders had read Powell’s statements Tuesday as a sign that a decision had been made because he had made a similar statement to a Senate subcommittee on Tuesday, but without the disclaimer that “no decision has been made.”
In response, stock prices declined on Tuesday, and some bond yields increased due to market expectations for a quicker rate hike pace.
In an apparent effort to dispel any notion that the Fed had already chosen to raise rates more aggressively in light of a recent series of statistics that indicated solid economic growth and still-high inflation, Powell made more nuanced comments on Wednesday.
After raising its benchmark interest rate by a half-point in December and by three-quarters of a point four times before that, the Fed reduced the pace of hikes in February, increasing it by just a quarter-point.
Powell’s remarks on Tuesday gave the impression that the Fed would resume more significant rate increases at its meeting on March 21–22.
The Republican head of the House Financial Services Committee, Rep. Patrick McHenry, questioned Powell on Wednesday, and Powell responded that the Fed would carefully review data on hiring, retail sales, and inflation that will be released next week before deciding on its next course of action.
Powell stated, “We have not made any decisions regarding the March meeting.