Powell says Fed likely to hike rates in March

"The economy no longer needs sustained high levels of monetary policy support."

Fed Chair Jerome Powell said on Wednesday that the U.S. central bank is likely to raise interest rates in March, and warned that inflation remains high and that supply chain issues are bigger and longer-lasting than previously thought.

"I would say that the committee is of a mind to raise the federal funds rate at the March meeting, assuming that conditions are appropriate for doing so. We have our eyes on the risks, particularly around the world. But we do expect some softening in the economy from Omicron, but we think that that should be temporary and we think that the economy should, the underlying strength of the economy should, you know, should show through fairly quickly after that."

Powell's comments following the end of a two-day policy meeting pushed stocks into negative territory by Wednesday's close.

Powell also reaffirmed plans to end the Fed's bond purchases in March before launching what he called a "substantial" reduction in its nearly $9 trillion balance sheet.

"The economy is much stronger and inflation is much higher. So I think that leads you to, and I have said this, being willing to move sooner than we did than the last time and also perhaps faster."

The combined moves will complete the Fed's pivot away from the loose monetary policy that has defined the coronavirus pandemic era and toward a more urgent fight against inflation.

Investors expect another three rate hikes this year after the March liftoff from the current near-zero level.