Market Wire: Powell Warns Rate Hikes Could Accelerate

The dollar and Treasury yields are surging as Federal Reserve Chair Powell calls recent economic data “stronger than expected,” in Senate testimony and warns “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” - verbiage that suggests a half percentage point hike is on the table for the central bank’s March meeting.

In comments released on the Fed’s website prior to the appearance, Powell said “The ultimate level of interest rates is likely to be higher than previously anticipated, and implicitly diminishes the likelihood of rate cuts in the next year. “Restoring price stability will likely require that we maintain a restrictive stance of monetary policy for some time”, noting “The historical record cautions strongly against prematurely loosening policy. We will stay the course until the job is done”.

Odds on a half point hike in March are floating above the 50-percent threshold, and terminal rate expectations are topping 5.6 percent as we go to pixels, but could shift downward in the coming minutes as the knee-jerk reaction fades and the Congressional questioning period begins.

The full text can be found here