Fed Chairman Powell: If necessary, we will raise interest rates by 50 basis points

In a speech prepared for the Association for Business Economics on Monday, Federal Reserve Chairman Jerome Powell said that to take tough action on inflation, the Fed will continue to raise interest rates until inflation is under control, and may be more aggressive, from the traditional 25 basis points to a more aggressive 50 basis points.

The Federal Reserve raised its benchmark interest rate by 25 basis points last week, the first increase in more than three years, as the U.S. consumer price index rose 7.9% year-on-year in February, the fastest since 1982.

" We will take necessary steps to ensure that prices return to stability," Powell said. "In particular, if we conclude that it is appropriate to act more aggressively by raising the federal funds rate by more than 25 basis points at one or more meetings, we will do so. If we determine that we need to tighten policy, moving beyond the common neutral approach to a tighter stance, we will also do so."

Following Powell's speech, the Dow Jones Industrial Average and Nasdaq Composite fell more than 1% as of 1:25 p.m. ET on Monday, while the S&P 500 fell 0.7%.

The crypto market also performed flat. Bitpush terminal data showed that as of press time, Bitcoin was changing hands around $41,110.73, down 0.6% in the past 24 hours, Ethereum rose 3.3% in the past 24 hours, and Solana fell 0.2%.

BitPush previously reported that Federal Open Market Committee (FOMC) officials indicated that the remaining six meetings this year may raise interest rates by 25 basis points each time. However, the market predicts that the probability of a 50 basis point rate hike at the May meeting is about 50-50.

Powell attributed much of the pressure to stress from factors specific to the coronavirus pandemic, particularly escalating demand for commodities, and he acknowledged that Fed officials and many economists had “widely underestimated” how long those pressures would last.

"As the world eventually settles into some kind of new normal, it still seems likely that the supply side will recover over time, but the timing and scope of that relief are highly uncertain, and in the meantime, as we set policy, we will focus on actual progress on these issues rather than assume a significant near-term relief on the supply side," Powell said.

Powell said last week that the FOMC is also ready to begin reducing its nearly $9 trillion balance sheet, a process he noted could begin as early as May but that no firm decision has been made.