Fed's Powell, Half-Point Hike In View, Completes Hawkish Pivot

• A half-point interest rate increase "will be on the table" when the Federal Reserve meets on May 3-4 to approve the next in what are expected to be a series of rate increases this year, Fed Chair Jerome Powell said Thursday in comments that pointed to an aggressive set of Fed actions ahead. 
• In likely his last public remarks before the Fed's next session, Powell also said he felt investors currently anticipating a series of half-point hikes were "reacting appropriately, generally," to the Fed's emerging fight against rising prices. 
• His comments appeared to pin down an expected rate path much steeper than projected at the Fed's March meeting, when policymakers at the median anticipated the target overnight federal funds rate would be increased to 1.9% by year's end. 
• The potential speed of the Fed's action has led some economists to warn a recession may now be more likely if businesses and households cut back spending more than anticipated as borrowing costs rise, or stock and other asset prices drop in value and eat into household wealth. 
• The interest rate on the 2-year Treasury note, the maturity most sensitive to expectations about Fed policy, rose above 2.7% for the first time since December 2018. Rising yields on both short- and long-term bonds are increasing costs for a variety of loans -- most notably the 30-year mortgage commonly used to finance home purchases, where the average rate rose to over 5% this week -- a key channel through which the Fed influences the economy.

(Source: Reuters)