Fed rates could go higher than expected, warns Jerome Powell

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Fed rates could go higher than expected, warns Jerome Powell

The top boss of the US Federal Reserve observes that “the latest economic data are stronger than expected”.

The Fed's main policy rate, which has been climbing for the past year to curb inflation, could continue to rise above 5.1%, the level at which Fed officials saw it up. now halt, chairman Jerome Powell warned on Tuesday.

The latest economic data is stronger than expected, suggesting that the final level of interest rates #x27;interest will likely be higher than expected, the Fed chairman told a Senate committee.

Fed officials released their latest forecasts in December, and will update them March 21-22 at their next meeting.

After several very large rate hikes, the Fed had raised them at a slower pace, even returning, on February 1, at the end of its last meeting, to the usual rate of increase of a quarter of a percentage point.

But the tide could again be reversed, warned Jay Powell.

“If all the data were to indicate that faster tightening is warranted, we would be prepared to accelerate the pace of rate hikes.

— Jerome Powell, Chairman of the US Federal Reserve

Although inflation has moderated in recent months, the process of bringing inflation down to 2% will be long and likely bumpy, the head of the mighty US Federal Reserve said.

< p class="e-p">To combat high inflation in the United States, the Fed has been raising rates for the past year from the range of 0 to 0.25% in which they were during the pandemic, to support economy through consumption, now at 4.5-4.75%.

Raising rates increases the cost of credit for households and businesses, and must therefore curb consumption, to ease the pressure on prices.

But despite these efforts, consumption remained solid, and inflation even rose again in January, to 5.4% year on year, according to the PCE index, favored by the Fed, and that & #x27;it wants to bring it down to around 2%.

Another measure of inflation, the CPI index, which is a reference and on which pensions are indexed , for its part, showed a slight slowdown, to 6.4% over one year, against 6.5% in December, accelerating however over one month for the first time since September, to 0.5% against 0.1%.

This should also weigh on employment, but the unemployment rate in January was at its lowest in more than 50 years, at 3.4%.

One ​​of the governors of the Fed, Christopher Waller, indicated on Thursday that he would support a hike in the key rate to above 5.4 % in the coming months, if inflation does not slow faster, and the labor market remains tight u.

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