Economic data is coming in 'stronger than expected,' the Fed chair told a Senate panel on Tuesday.
The Federal Reserve may need to increase the size of its interest rate hikes and raise borrowing costs to higher levels than previously projected if evidence continues to point to a robust economy and persistently high inflation, Federal Reserve Chair Jerome Powell said Tuesday in prepared testimony to a Senate panel.
"This statement opens the door to a return to 50bp hikes at the March meeting and potentially beyond if the data flow confirms the re-acceleration in both the labor market and inflation, which both surprised to the upside in January," noted Morgan Stanley analysts in a Tuesday research note. "[S]ince February inflation appears to be a bit softer than the previous month, the market may currently be overreacting," Roach noted."The Fed will have several key metrics in hand before their next meeting, including another look at retail sales and inflation."Most economists and Wall Street investors had expected the Fed to carry out another quarter-point increase at upcoming meetings.
In his remarks Tuesday, Powell walked back some of the optimistic comments about declining inflation he had made after the Fed's February 1 meeting, when he noted that"the disinflationary process has started" and he referred to"disinflation" — a broad and steady slowdown in inflation — multiple times. At that time, year-over-year consumer price growth had slowed for six straight months.
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