US Fed's Powell "Considering 0.5% Rate Hike... Moving Faster Is Appropriate"

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Jerome Powell, Chairman of the Federal Reserve (Fed), hinted that the benchmark interest rate could be raised by 0.5 percentage points at once at next month's Federal Open Market Committee (FOMC) meeting. Following Powell's 'hawkish' remarks suggesting that such big steps could continue, the New York stock market closed lower across the board.

On the 21st (local time), Powell attended a panel discussion hosted by the International Monetary Fund (IMF) in Washington DC and stated, "Moving a little faster is appropriate from my perspective," adding, "A 0.5 percentage point increase could be proposed at the May meeting."

In particular, he said, "The market is processing what we are saying. The market is generally responding appropriately," implying that the 0.5 percentage point rate hikes may not end in May but could be implemented several times thereafter. Market observers expect that the Fed could decide to raise rates by 0.5 percentage points at least three times out of the six remaining FOMC meetings this year, starting with the May meeting.

That day, Powell emphasized, "The economy does not function properly without inflation stabilization," and "The Fed is working to bring inflation back to the 2% target level."

However, regarding the possibility that the US inflation, which is at its highest level in over 40 years, peaked in March, he expressed a cautious view: "It may have peaked, but we do not know. We will not be certain." He added, "We will raise rates and need to move quickly toward a more neutral level."

He also indicated that "We will use the tools we have," suggesting that quantitative tightening, including balance sheet reduction, will begin soon following the rate hikes.

His remarks attracted attention as the last official opportunity to confirm Powell's message before the FOMC meeting scheduled for May 3-4. Immediately after Powell's comments, the New York stock market saw a notable decline, centered on the interest rate-sensitive Nasdaq index (-2.07%). The Dow Jones Industrial Average and the S&P 500 closed down 1.05% and 1.48%, respectively, that day.

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