“Fifty basic points will be on the table for the May meeting,” he assured.
The Fed chairman also said he felt investors currently anticipating a series of half-point hikes were “generally reacting appropriately” to the Fed’s emerging fight against rising prices.
Traders in contracts pegged to the overnight fed funds rate currently expect the Fed to raise it to a range of between 2.75% and 3% by the end of the year, a pace that would imply half-point hikes over the next three meetings and quarter-point gains in the other three meetings of the year.
“We are really committed to using our tools to reduce inflation,” Powell said, acknowledging that the Fed’s hope that inflation would decline during the economic reopening after the pandemic has not panned out so far, to the point where the Fed it is no longer dependent on the help of improvements in global supply chains, for example.
“We had an expectation that inflation would peak right now and come down over the course of the rest of the year and then further,” Powell said.
“These expectations have been disappointed in the past. We want to see real progress… We’re not going to be helped by supply-side healing. We’re going to raise rates and quickly get to levels that are more neutral” and then larger if necessary.
