Jay Powell had always said that if inflation was in danger of spiralling out of control, the Federal Reserve would be willing to bring out the hammer to knock prices down.
On Wednesday, in his most hawkish press conference since the start of the pandemic, the chair of the Fed gave the clearest signal yet that such a moment was fast approaching.
“Powell essentially said to the markets and the economy, ‘put on your seatbelt, we are getting ready to take off’,” said Nathan Sheets, global chief economist at Citigroup and a former under-secretary at the US Treasury. “If inflation doesn’t fall as they expect, the Fed is prepared to be vigorous.”
The Fed’s drive towards tighter policy was apparent not just from what Powell said about the path forward for monetary policy, but also what he refused to divulge about the US central bank’s plans for interest rates later this year.
“Powell was distinctly not willing to rule out more frequent [or] larger rate hikes,” Sheets said.