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Markets on Edge as Powell Signals Potential for Rapid Interest Rate Hike This Month

Jerome Powell, chairman of the U.S. Federal Reserve, hinted that the Fed could speed up interest rate hikes again to curb inflation and that the "final interest rate" could also be higher than previous forecasts. The market also showed signs of shaking, with U.S. Treasury yields rising sharply during the day due to Powell's remarks, which left open the possibility of a big step (0.5% point increase) next month. 


"The recent U.S. economic indicators have been stronger than expected, suggesting that they are likely to be higher than the Fed's expected final interest rate level," Powell said at a Senate Banking Committee hearing on the 7th. The Federal Open Market Committee (FOMC) predicted at the end of last year that interest rates would be 5.0% to 5.25% by the end of this year. Currently, the U.S. benchmark interest rate has risen to 4.5-5.75%, and Chairman Powell confirmed that interest rates are likely to rise at least 0.75% points further in the future. In response to questions from lawmakers later, Powell also said, "The peak interest rate in the dot plot (to be announced in March) will be higher than the forecast in December last year." 


In addition, the Federal Open Market Committee (FOMC), which will be held on the 21st and 22nd of this month, has adjusted the rate increase from a baby step to a big step again, suggesting that it can return to the high-intensity tightening mode. Chairman Powell said, "If the overall economic indicators show the need for faster tightening, we will prepare to speed up the rate hike further." 


The Fed has raised interest rates by a total of 4.5% points eight times in the year since March last year. In particular, he took the giant step (0.75 percentage point increase) four times in a row since June, but since late last year, inflation has slowed and returned to the normal speed of the baby step (February) through the big step (December). However, amid recent signs of a rebound in inflation, the possibility of turning to a big step this month has increased. 

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Tags: #economics #JeromePowell #fomc


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