Fed Chair Jerome Powell has brought back 50 basis point hikes to the table after recent figures showed that inflation is picking up.
Powell’s comments during the first part of a two-part testimony indicate that:
- The terminal interest rate may be 5.5%-5.75% – higher than the initially anticipated 5.1% in December.
- Larger interest rate hikes may be back on the agenda in an effort to curb stubborn inflation.
Despite this, Powell showed a general sense of optimism about the Fed’s ability to curb inflation without driving the economy into a recession.
Following the news, the markets reacted negatively, with the Dow Jones, Nasdaq, and S&P 500 all declining by more than 1%.
The decision on interest rates is set to be decided meeting by meeting.
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