The Fed is also prepared to move in larger steps if the “totality” of incoming information suggests tougher measures are needed to control price increases, Powell told U.S. lawmakers on Tuesday.
The Fed had slowed the pace of its tightening to 25 basis points at its last two meetings, following larger hikes last year.
“Powell is explicitly talking about a higher target for interest rates. This is something that the market has been talking about but obviously hasn’t been fully priced in,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina.
Fed funds futures traders are now pricing in a roughly 60% probability that the Fed will hike rates by 50 basis points at its March 21-22 meeting. The probability had been seen at around 22% earlier on Tuesday.
Investors will be closely watching the Fed’s updated “dot plot” of rate expectations at March’s meeting for further indications…
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