At its Feb. 1 meeting, the Federal Open Market Committee raised the federal funds rate a quarter-point to a range of 4.5% to 4.75%. The 25-basis-point hike follows a 50-basis-point increase at the committee's previous meeting in December, and four 75-basis-point hikes in each of its preceding four meetings.
In January, data from the Bureau of Labor Statistics showed the consumer price index rose 6.5% in December from a year earlier, down from 7.1% year-over-year in November. The annualized CPI figure has dropped steadily since June, when it was at 9.1%, a 40-year high.
Two days after the 25-basis-point hike, additional U.S. Bureau of Labor Statistics data showed that the U.S. economy added 517,000 jobs in January, shattering expectations and dipping the unemployment rate to 3.4%.
Mr. Powell said the strong jobs numbers show that the Fed's process to tamp inflation will take a time,
He later added that the labor market is strong "because the economy is strong. It's a good thing that we've been able to see the beginnings of disinflation without seeing the labor market weaken. There's a lot of demand for workers."
But what happens if the jobs numbers continue to beat expectations?
"If the data were to continue to come in stronger than we expect, and we were to conclude that we needed to raise rates more than is priced into the markets or that we wrote down at our last group of forecasts in December, then we would certainly do that, we would certainly raise rates more," Mr. Powell said.
When asked about the debt ceiling — a cap on the money the U.S. government can borrow to pay its bills — Mr. Powell said the Fed has no authority.
"This really can only end one way and that is with Congress raising the debt ceiling in timely fashion so that the U.S. can pay all of its bills when and as due," he said. "That's what has to happen and if that doesn't happen, no one should think that the Fed has the ability to shield the financial markets or the economy from the consequences of moving too slow."
Republicans in Congress have said they oppose raising the debt ceiling without structural spending reform.
The federal government hit its statutory debt limit Jan. 19, and the Treasury Department might be out of options to pay U.S. bills come June, Treasury Secretary Janet L. Yellen said in a letter to congressional leaders last month.
The debt ceiling does not authorize any new spending, but it allows the Treasury Department to finance the existing legal obligations already approved by Congress.
A coalition of 11 state treasurers and the comptrollers of Maryland and New York City said in a Jan. 24 sent a letter to House Speaker Kevin McCarthy, R-Calif., that if the debt ceiling were breached, the value of portfolios invested across asset classes would decrease significantly. "This would include damage to Americans' pension funds, 401(k)s and other retirement and educational savings vehicles," they said in the letter.