In two weeks, the Fed would raise interest rates by 0.25%

The president of the United States Federal Reserve (Fed), Jerome Powell, indicated on Wednesday that he will propose an increase in reference rates of a quarter of a percentage point (0.25%) at the next meeting of the monetary committee of the organization that will be held will take place in two weeks, scheduled for March 15 and 16.

This occurs in a context in which inflation in the United States is above 2% and a stronger rise is not ruled out if necessary in future meetings.

“I think it will be appropriate to increase our target range … at the March meeting in two weeks. And I’m prone to proposing a 25 basis point rate hike,” Powell said during a congressional hearing.

He added that making an appropriate monetary policy in this environment requires recognizing that the economy evolves in unexpected ways, so they will have to “be agile to respond to incoming data and the evolution of the outlook.”

Powell indicated that the process of removing accommodative policy under the current circumstances will involve both increases in the target range of the fed funds rate and a reduction in the size of the Fed’s balance sheet.

Conflict in Ukraine

The president of the Fed also referred to the impact of the conflict in Ukraine on the economy of the United States, which he considers “very uncertain”.

Despite prices rising at a rate unprecedented in four decades and oil above $100 a barrel, “the short-term effects on the economy of the invasion of Ukraine, the ongoing war, the sanctions, and the events ahead remain highly uncertain,” Powell said in his semiannual statement to Congress. “We will closely monitor the situation.”

While rising oil prices could fuel inflation, sanctions on Russia for the invasion and other fallout from the conflict could slow economic recovery.

To establish monetary policy in the current environment, it is necessary to “recognize that the economy it evolves uncertainly,” argued Powell. “We will have to be agile in responding to incoming data and evolving outlooks,” he warned.

Agencies