US interest rates could go higher than expected

US stocks fell and the dollar rose following the remarks, which comes just a few weeks before the bank is due to make another rates announcement.

Many analysts had been expecting another 0.25 percentage point increase.

But the comments suggest the bank could move more aggressively.

Over the last year, the Fed has raised its benchmark rate to more than 4.5% – the highest rate since 2007 – responding to prices rising at the fastest pace in decades.

Inflation – the rate at which prices rise – in the US stood at 6.4% in January.

While that is lower than it was, it remains far higher than the 2% rate considered healthy, andMr Powell said officials have been worried by recent data suggesting that progress could be stalling.

He said that could push the bank to lift rates above the 5% to 5.5% officials had forecast in December.

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Raising borrowing costs is one mechanism to slow price increases in the wider economy.

“The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated,” Mr Powell said in Congress during the first of two days of testimony on the economy.

“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,” he added.

The comments generated some pushback from lawmakers, especially those on the left.

They said the moves would do little to address causes of the inflation problem – such as the war in Ukraine and supply chain issues – while leading to an economic slowdown that will throw millions of people out of work.

“You are gambling with peoples’ lives,” said Senator Elizabeth Warren, a Democrat from Massachusetts, who also blamed the inflation problem on price-gouging by companies.

Mr Powell said the economy would be in worse shape if the bank did not act.

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“The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated,” Mr Powell said in Congress during the first of two days of testimony on the economy.

“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,” he added.

The comments generated some pushback from lawmakers, especially those on the left.

They said the moves would do little to address causes of the inflation problem – such as the war in Ukraine and supply chain issues – while leading to an economic slowdown that will throw millions of people out of work.

“You are gambling with peoples’ lives,” said Senator Elizabeth Warren, a Democrat from Massachusetts, who also blamed the inflation problem on price-gouging by companies.

Mr Powell said the economy would be in worse shape if the bank did not act.

BBC News