Federal Reserve Chairman Jerome Powell spoke before the Senate Banking Committee on Tuesday, answering questions about the central bank’s decisions in recent months. During his testimony, Powell warned that the bank’s rate hikes could accelerate this year.
During his appearance before the committee, Powell said that the robust economy and continued inflation could keep rate hikes coming at a larger level and increase borrowing costs.
While everything remains conditional, Powell says the latest economic data is “stronger than expected.” Because of this, he said the level of “interest rates is likely to be higher than previously anticipated.”
“If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes,” Powell said.
The next meeting for the central bank is planned for March 21-22, and following the chair’s comments, an increase of half a percentage point could be on the table. The last key interest rate hike was by .25% in early February.
At the committee hearing, Powell was questioned about the rate hikes and the impacts the economists say they will have on the jobs market.
During the questioning, Sen. Elizabeth Warren (D-MA) grilled Powell over the bank’s hikes bringing the possibility of nearly 2 million people losing their jobs. While Powell said that the potential rise in unemployment wasn’t an “intended consequence,” Warren seemed to think otherwise.
“So Chair Powell, if you could speak directly to the 2 million hard-working people who have decent jobs today, who you’re planning to get fired over the next year, what would you say to them?” Warren asked. “How would you explain your view that they need to lose their jobs?”
Powell went back at Warren, saying he would “explain to people more broadly that inflation is extremely high and it’s hurting the working people of this country badly. All of them. Not just 2 million of them. But all of them are suffering under high inflation, and we are taking the only measures we have to bring inflation down.”
The expected shake-up to the economy is not something new, as Powell said last month that while the Fed expects prices to fall this year, it would be a rocky path to doing so.
“We expect 2023 to be a year of significant decline in inflation,” Powell said. “This process is likely to take quite a bit of time. It’s not going to be, we don’t think, smooth. It’s probably going to be bumpy.”
As the Fed is now expected to raise rates higher than previously thought, Warren told Powell that he is “gambling with people’s lives.”
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