Fed Chair Jerome Powell said Wednesday that he favors a small rate increase -- a quarter-point -- over a larger hike recommended by some analysts who are concerned about rising inflation. File Photo by Brendan Smialowski/UPI | License Photo
March 2 (UPI) -- Federal Reserve Chair Jerome Powell told a congressional committee on Wednesday that he would like to see a slight interest rate hike when the Fed meets later this month instead of a larger increase that some analysts favor, due to rising inflation and the crisis in Ukraine.
Powell made the remarks in a hearing before the House financial services committee.
The Federal Reserve hasn't increased interest rates since late 2018 and took a number of steps to ease lending after the arrival of the COVID-19 pandemic.
Analysts have expected the Fed to hike rates up from the current level, near zero, for a number of weeks. At Wednesday's hearing, Powell indicated that a rate hike is coming at the Fed's next policy meeting from March 15-16 -- due to rising inflation and the worsening crisis in Ukraine.
"The bottom line is that we will proceed, but we will proceed carefully as we learn more about the implications of the Ukraine war for the economy," he told the committee.
Powell underscored that the economic impact of the fighting in Ukraine, including the international community's response, remains "highly uncertain." At the last policy meeting in January, the Fed left rates unchanged.
In his State of the Union address on Tuesday night, President Joe Biden
laid out details for sustained economic recovery and asked lawmakers to confirm his nominees to the Federal Reserve. Photo by John Angelillo/UPI
"Making appropriate monetary policy in this environment requires a recognition that the economy evolves in unexpected ways. We will need to be nimble in responding to incoming data and the evolving outlook."
"So far we have seen energy prices move up further," he added. "And those increases will move through the economy and push up headline inflation and also they're going to weigh on spending."
Powell said that he favors a small rate increase -- a quarter-point -- over a larger hike recommended by some analysts who are concerned about rising inflation. The commerce department said last month that inflation has risen, on a year to year basis, by the highest rate in 40 years. He also said, however, that he is open to a larger increase if inflation doesn't wane as experts predict.
Nonetheless, Powell said in his testimony on Wednesday that the U.S. economy is strong, the labor market is very tight and inflation is well above the Fed's target rate of 2% -- all signals that, traditionally, lead to a rate increase.
Powell told lawmakers that he also expects that the Fed will make good progress toward an agreement to "shrink the balance sheet" during its policy meeting later this month.
In his State of the Union address on Tuesday night, President Joe Biden laid out details for sustained economic recovery and asked lawmakers to confirm his nominees to the Federal Reserve.
"Let's get this done," he said. "And while you're at it, confirm my nominees to the Federal Reserve, which plays a critical role in fighting inflation."