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Powell backs 25-basis-point March rate hike

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STORY: “I'm inclined to propose in support of a twenty five basis point rate hike.”

Federal Reserve Chair Jerome Powell told lawmakers he would back a 25-basis-point rate hike in March, and is prepared to go even higher if inflation doesn’t subside in the U.S. as fast as expected.

“...those of us on the committee have an expectation that inflation will peak and begin to come down this year. And to the extent inflation comes in higher or is more persistently high than that, then we would be prepared to move more aggressively by raising the federal funds rate by more than 25 basis point at a meeting or meetings.”

In his testimony before a House panel Wednesday, Powell reiterated the core Fed narrative…. that high inflation, which is running at about three times the central bank's 2% target, and an "extremely tight" labor market warrant higher interest rates.

But Powell admitted that the central bank's plan has been complicated by the outbreak of war in Ukraine… raising a host of new risks, from even higher inflation, to slower growth and the possibility of stress in financial markets should the conflict broaden or conditions deteriorate.

“…the ultimate economic effects of the war and all of the sanctions and events yet to come are just very highly uncertain. And we need to, we need to understand that.”

The Fed slashed rates in 2020 to blunt the impact of the coronavirus pandemic, but there is now broad agreement that the current level of borrowing costs is out of step with an economy that has rebounded faster than expected from the crisis.

The Fed chief told lawmakers that the coronavirus pandemic's impact on the economy finally appeared to be easing, and that hiring remains strong, and inflation remains a chief risk.