Federal Reserve policymakers will take the necessary steps to get inflation down even if that means increasing interest rates by more than 25 basis points at a meeting or meetings, Chair Powell said in comments to a National Association for Business Economics conference in Washington. Powell also repeated that the Fed's reductions to its massive balance sheet could start by May. The Fed raised the target for the fed funds rate by a quarter-point to 0.25%-0.5% during its March 2022 meeting for the first time in three years and signaled ongoing rate hikes ahead. The Fed now sees rate hikes at each of the six remaining meetings this year, with the fed funds rate reaching 1.9% by year's end.
The dollar index rose above 98.8 on Tuesday, extending gains for a third straight session after Federal Reserve Chair Jerome Powell said rates could increase more than the previously approved 25 basis points if needed to bring too-high inflation under control. The Fed delivered a quarter-point rate hike last week in a measured move to combat surging prices while trying to avoid a policy error which could send the US economy into recession. Powell's recent comments brought investors' focus on the potential speed and size of future rate hikes.
Meanwhile, investors continued to monitor the Russia-Ukraine war as ongoing peace talks failed to make progress. Analysts warned that the Ukraine conflict is likely to continue, exacerbating supply disruptions and adding to inflationary pressures that would support haven bids for the dollar.
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