Federal Reserve Chair Jerome Powell will begin two days of hearings before Congress on Wednesday that will likely focus on the question that consumed the central bank last week: How far and how fast will the Fed raise its key interest rate from here
Federal Reserve Chair Jerome Powell will begin two days of hearings before Congress on Wednesday that will likely focus on the question that consumed the central bank last week: How far and how fast will the Fed raise its key interest rate from here?
The hearings, beginning with the House Financial Services Committee, follow a Fed meeting last week that produced a muddled picture of its likely next steps. The 18 members of its policy committee predicted two more interest rate hikes this year — one more than analysts had expected — to fight inflation, which they now think will be higher next year than they previously forecast.
Despite that dour forecast, the Fed’s policymakers agreed last week to forgo a rate hike for the first time in 11 meetings dating back to March 2022. And at a news conference, Powell explicitly said no decisions had been made about whether to raise the Fed’s benchmark rate at its next meeting in late July. Still, most economists inferred from both the policymakers‘ forecasts and Powell’s words that a rate hike next month is all but assured.
The “meeting was hawkish, and peculiar,” said Michael Feroli, an economist at JPMorgan and a former Fed staffer. “Why not just go ahead and hike?“ (In Fed parlance, “hawks” generally favor higher rates to quell inflation, while “doves” typically advocate lower rates to aid a healthy job market.
