Federal Reserve Chair Jerome Powell said policymakers expect interest rates will need to move higher to reduce U.S. growth and contain price pressures, even though they held rates steady at their meeting last week, Bloomberg News reported. “Earlier in the process, speed was very important,” Powell said Wednesday in testimony before the House Financial Services Committee, referring to the pace at which officials lifted rates over the past year. “It is not very important now.” It may make sense to continue moving rates higher in the coming months, but at a more moderate pace, Powell said in response to lawmakers’ questions about the Fed’s plans. The timing of additional hikes will be based on incoming data, he said in his opening statement. U.S. stocks fell following Powell’s rates warning, thwarting bets that the U.S. central bank was nearing the end of its tightening cycle. Swaps traders held in check pricing a greater than 80% probability that the Fed will lift its policy rate by a quarter point next month. The Federal Open Market Committee paused its series of interest-rate hikes last week for the first time in 15 months, leaving rates in a range of 5% to 5.25%. But Fed officials estimated rates would rise to 5.6% by the end of the year, according to their median projection, implying two additional quarter-point hikes following surprisingly persistent inflation and labor-market strength.
