Monetary policy US Federal Reserve hints at aggressive interest rate policy – Fed could raise key interest rates by up to 0.50 percentage points at once

The United States the central bank (Fed) must act “quickly” in raising interest rates and possibly “more aggressively” in curbing inflation, says central bank governor Jerome Powell.

“The labor market is very strong and inflation is far too high. There is an obvious need to move quickly to bring monetary policy back to a more neutral level, ”Powell said at a conference of the National Association for Business Economics on Monday.

According to the Reuters news agency, Powell also said that “if we decide it is appropriate to raise the key interest rate more aggressively by more than 25 basis points, we will do so”.

The US Federal Reserve raised its key interest rate by 25 basis points last week, from 0.25 percentage points to a range of 0.25 to 0.50 per cent, and a message of further withdrawals. This was the first rate hike in three years.

Read more: US Federal Reserve to start tightening monetary policy and hints at six more rate hikes this year

Multi the economist predicted before Monday the Fed’s policy rate would rise to 1.9 per cent by the end of the year. The central bank would achieve it with six 0.25 percentage point rate hikes at its next interest rate meetings.

Powell’s comments prompted investors to price a 0.50 percentage point rate hike at the next two meetings in May and June. The measures would raise the key interest rate to 2.25-2.50% by the end of the year.

U.S. federal bond market yields rose sharply to their highest level since May 2019, following Powell’s comments.

The market rate of the country’s two-year government bond rose by as much as 16 basis points to 2.12 per cent on Monday, and the market rate of the 10-year loan rose by 15.8 basis points to 2.31 per cent.

In Asian trading, the two-year market rate had risen 7.4 basis points to 2.19 percent on Tuesday morning. The market interest rate on the ten-year loan, on the other hand, had risen by 4.5 basis points to 2.34%.