Federal Reserve Chairman Jerome H. Powell on Wednesday emphasized that the central bank has not decided on the size of its next rate hike, though market participants are now predicting a 50-basis-point increase later this month following Mr. Powell's comments before Congress.
"If — and I stress that no decision has been made on this — but if the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes," Mr. Powell said in testimony before the House Financial Services Committee during day two of his semiannual monetary policy report to the Congress. "Restoring price stability will likely require that we maintain a restrictive stance of monetary policy for some time."
Mr. Powell on Tuesday appeared before the Senate Banking Committee where he read the same statement, though on Wednesday he added the line stressing that no decision has been made on increasing the pace of future rate hikes.
Markets sank following Mr. Powell's testimony Tuesday when he signaled the Fed would raise rates faster if the incoming economic data warranted such a move and warned that the process of getting inflation back down to 2% "has a long way to go and is likely to be bumpy."
According to the CME FedWatch Tool that tracks trading in the 30-day fed funds futures, traders as of Wednesday afternoon were pricing in a 77.1% chance of a 50-basis-point hike at the Fed's next meeting March 21-22. That's up from a 30% chance of such an increase prior to Mr. Powell's testimony Tuesday.
In its fight against inflation, the Federal Open Market Committee has raised interest rates dramatically over the past year, including a 25-basis-point hike at its last meeting in February. The federal funds rate now stands at a range of 4.5% to 4.75%. The 25-basis-point hike in February followed a 50-basis-point increase in December, and four 75-basis-point hikes in each of the committee's previous four meetings.