Fed still up in the air on whether to accelerate rate hikes: Powell

• Published date: 09 March 2023
• Publication title: The Korea Times

Federal Reserve Chair Jerome Powell on Wednesday reaffirmed his message of higher and potentially faster interest rate hikes, but emphasized that debate was still underway with a decision hinging on data to be issued before the U.S. central bank's policy meeting in two weeks.

"If ? and I stress that no decision has been made on this ? but if the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes," Powell told the U.S. House of Representatives Financial Services Committee in testimony that added a cautionary clause to the otherwise identical message he delivered to a Senate committee on Tuesday.

He emphasized the point again in response to a question explicitly about the expected outcome of the March 21-22 meeting from Representative Patrick McHenry, the Republican chair of the committee.

"We have not made any decision," Powell said, but will be looking closely at upcoming jobs data on Friday and inflation data next week in deciding whether rate hikes need to shift back into a higher gear.

As happened in the session on Tuesday, lawmakers pressed Powell about the impact Fed policy was having on the economy and whether officials were risking recession in the drive to temper price increases.

Powell acknowledged once again that the Fed was wrong in initially thinking inflation was only the result of "transitory" factors that would ease on their own, and said he was surprised as well in how the labor market has behaved through the recovery from the COVID-19 pandemic.

There have been "a bunch of firsts," Powell said. "If we ever get this pitch again, we'll know how to swing at it."

Asked if he would pause interest rate hikes to avoid a recession, Powell responded "I don't do 'yes or no' on 'will I pause interest rate hikes?' That's a serious question. I can't tell you because I don't know all the facts."

The Fed's intense battle against inflation over the past year has reshaped financial markets, made home mortgages and other credit more costly, and aimed to cool the economy overall.

As of the start of the year it seemed to be working, with Powell at a Feb. 1 news conference saying a "disinflationary process" had taken hold.

Inflation data since then has been worse than expected, and revisions to prior months showed the Fed had made less progress than thought in returning inflation to its 2 percent target from current levels that are more than double that.

As Powell delivered his...