Powell: Half-Point Of Additional Hikes A "Good Guess" Of Policy Outcome  

• Further Federal Reserve rate increases are "a pretty good guess" of where the central bank is heading if the economy continues in its current direction, Fed Chair Jerome Powell said in remarks on Wednesday to lawmakers on Capitol Hill.
• In response to a question late in a three-hour hearing before the House Financial Services Committee, Powell said he would not characterize the Fed's decision last week not to increase rates as a "pause," and noted the fact that a majority of policymakers see two more quarter-point rate increases as likely by the end of the year.
• Though Fed officials held off on raising interest rates at their meeting last week, Powell called that an exercise in prudence, allowing time to gather more information before deciding on further rate increases that Fed policymakers feel will be necessary by the end of the year.
• Despite the consensus on lowering inflation, the Fed is at a point where opinions about the need for and timing of additional interest rate increases may start to diverge. As it was for past presidential incumbents, how that debate gets resolved could make the difference between a benign election-year economy and a corrosive one.
• For Biden, the success or failure of Fed policy could mean a "soft landing" of continued economic growth, lower inflation and only modestly higher unemployment, or it could force him to campaign against a backdrop of increasing joblessness, stubbornly higher prices, and punishing interest rates for anyone trying to buy a home or car or finance a business.
• The Fed at its meeting last week held its benchmark interest rate steady at between 5% and 5.25%, but officials projected rates will have to increase another half percentage point by year's end because inflation has been falling so slowly and remains more than double the Fed's 2% target.

(Source: Reuters)