Powell hints at further rate rises as US battles inflation

Jerome Powell, chair of the Federal Reserve, has signalled it may need to make more interest rate rises than expected in response to surprisingly high employment figures.

Speaking at The Economics Club of Washington DC, a non-profit forum for global business leaders, Mr Powell said: “The reality is that we are going to react to the data. If we continue to get higher jobs reports or higher inflation reports, it may be the case that we have to raise rates more.”

Mr Powell said inflation is unlikely to go away quickly. “The base case for me is that it will take some time. We will have to do more rate increases and then look around to see if we have done enough,” he said.

Last week, Mr Powell said that the disinflationary process had begun its early stages, as inflation began to cool in the goods sector. But the unanticipated strength of the labour market data has raised fears of further inflationary pressures.

American non-farm jobs rocketed by 517,000 in January – 332,000 more than the 185,000 expected and nearly double the number recorded in December.

“We didn’t expect it to be that strong. That shows you why we think this process will take a significant period of time,” Mr Powell said. 

“If the data were to continue to come in stronger than expected and we conclude that we need to raise rates more than we previously thought, then we would certainly do that. We would certainly raise rates more,” he added.