MNI: Fed Rate Decisions To Be Made Meeting By Meeting - Powell

Federal Reserve Chairman Jerome Powell Wednesday told Congress the U.S. central bank plans to continue to raise interest rates with sizes decided on a meeting by meeting basis.

"We will make our decisions meeting by meeting, and we will continue to communicate our thinking as clearly as possible," he said in written testimony to Congress. "We anticipate that ongoing rate increases will be appropriate; the pace of those changes will continue to depend on the incoming data and the evolving outlook for the economy."

"Our overarching focus is using our tools to bring inflation back down to our 2% goal and to keep longer-term inflation expectations well anchored," Powell added.

The Fed raised interest by 75 bps for the first time since 1994 last week, pushing the federal funds rate target to a range of 1.5% to 1.75%. It also revised up its 2022 PCE inflation forecast to 5.2% from 4.3%. Fed Chair Powell indicated he saw either a 50bp or 75bp move at the July meeting, while Governor Christopher Waller on Saturday showed support for 75bp depending on the path of economic data.

TEMPERING GROWTH

In his prepared remarks to senators, Powell said the U.S. economy "is very strong and well positioned to handle tighter monetary policy."

Pointing to swings in inventories and net exports for the negative GDP print in the first quarter "despite strong underlying demand," Powell said recent indicators suggest that real gross domestic product growth has picked up this quarter, with consumption spending remaining strong.

But Powell took note of some slowing in the economy. "Growth in business fixed investment appears to be slowing, and activity in the housing sector looks to be softening, in part reflecting higher mortgage rates," he said. Sources at Fannie Mae and CoreLogic told MNI last week a rise in housing costs could make it harder to avoid more drastic monetary tightening.

"The tightening in financial conditions that we have seen in recent months should continue to temper growth and help bring demand into better balance with supply," he said.