Powell: Ultimate level of interest rates likely to be higher than previously anticipated

Highlights of prepared testimony from Federal Reserve chairman Jerome Powell for the Senate finance committee. He will answer questions afterwards.

• If totality of incoming data indicates faster tightening is warranted, we are prepared to increase pace of hikes
• We will continue to make our decisions meeting by meeting
• Latest economic data Economic Data Economic data typically comes in the form of news releases that are disseminated daily. This information is extremely valuable to retail and institutional forex traders, given the influence such data has on currency rates.Most of the major economic events that are released are reported by sovereign governments throughout the globe. Moreover, there are several economic data points that are released by private organizations that can also move the market.By and large, when new information becomes a Economic data typically comes in the form of news releases that are disseminated daily. This information is extremely valuable to retail and institutional forex traders, given the influence such data has on currency rates.Most of the major economic events that are released are reported by sovereign governments throughout the globe. Moreover, there are several economic data points that are released by private organizations that can also move the market.By and large, when new information becomes a Read this Term stronger than expected, particularly inflationary pressures
• Some strength in overall January data reflects better weather
• Little sign of disinflation so far in core services excluding housing
• To get inflation Inflation Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Read this Term back to 2% we need to lower core services inflation ex housing and very likely will get some softening in labor market
• History cautions against loosening policy prematurely
• Ongoing increases in policy rate likely appropriate

The odds of 50 bps in March are now up to 42% from about 26% before Powell spoke. The peak rate is now up to 5.59% from 5.45% beforehand.

This is a greenlight for hiking and the US dollar is stronger across the board. This assures that the dot plot will move up on March 22.

It's interesting that he's leaving the 25 vs 50 bps debate open; the market hasn't gone into an FOMC meeting with something like a 40/60 probability in a long time.

This is the key section for me, but is this acknowledging the potential for a faster pace later if if data is strong or signaling that it's coming in March if jobs and inflation are hot?

"We are seeing the effects of our policy actions on demand in the most interest-sensitive sectors of the economy. It will take time, however, for the full effects of monetary restraint to be realized, especially on inflation. In light of the cumulative tightening of monetary policy and the lags with which monetary policy affects economic activity and inflation, the Committee slowed the pace of interest rate increases over its past two meetings. We will continue to make our decisions meeting by meeting, taking into account the totality of incoming data and their implications for the outlook for economic activity and inflation.

Although inflation has been moderating in recent months, the process of getting inflation back down to 2 percent has a long way to go and is likely to be bumpy. As I mentioned, the latest economic data have come in stronger than expected, which suggests that the ultimate 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. Restoring price stability will likely require that we maintain a restrictive stance of monetary policy for some time"