Powell has ‘made it clear’ the Fed will not ‘pivot’ on rates: Jeff Sica
Circle Squared Alternative Investments CEO Jeff Sica joins ‘Varney & Co.’ to share his market outlook and breaks down his predictions for how the Federal Reserve will handle rate hikes going forward.
Pervasive inflation, a hot job market and a resilient consumer have put the option of a half-percentage-point interest rate hike on the table when the Federal Reserve meets at the end of March.
Chair Jerome Powell told lawmakers during two days of back-to-back congressional testimony that policymakers are prepared to raise interest rates higher than previously expected and pick up the pace of increases in the face of hotter-than-expected economic data.
"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," Powell said in prepared remarks before the Senate Banking Committee. "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."
FED CHAIR POWELL SAYS INTEREST RATES ARE ‘LIKELY TO BE HIGHER’ THAN PREVIOUSLY EXPECTED
Central bankers are in the midst of the most aggressive campaign since the 1980s to crush persistently high inflation. Although the consumer price index has slowly fallen from a high of 9.1% notched in June, it remains about three times higher than the pre-pandemic average.
Officials slowed the pace of rate increases to a quarter percentage point during their meeting last month, lifting the benchmark federal funds rate to a range of 4.5% to 4.75%. That followed a half-point increase at their December meeting and four consecutive 75-basis-point moves before that. The central bank typically moves rates in quarter-point increments.
At the time, policymakers suggested that slower rate moves could allow them to better assess the impact that tighter monetary policy is having on the economy.
INFLATION STILL OUTSTRIPPING WAGES IN MOST US CITIES
But since then, economic data has consistently surprised to the upside, suggesting that steeper interest rates are so far having a minimal effect on the economy and that inflation remains pervasive.