The Federal Reserve could 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, according to a report from the Associated Press.
That’s according to a statement from Fed Chair Jerome Powell to the Senate Banking Committee. “The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated. 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.”
The Fed raised its benchmark rate by a quarter-point in early February after imposing a half-point increase in December and four three-quarter-point hikes before that. Over the past year, the central bank has raised its key rate, which affects many consumer and business loans, eight times.
Most economists and Wall Street investors had expected the Fed to carry out another quarter-point increase when it next meets March 21–22. But in recent days, traders have been pricing in a greater likelihood of a half-point increase, according to futures markets. Powell’s comments suggest a half-point increase in March is possible.
