Fed’s Jerome Powell to Head to the House With Interest Rates in Focus

His remarks underscore the challenge facing the central bank as it raises interest rates at the most rapid clip since the 1980s to slow the economy and cool inflation.

Rising fuel costs and supply-chain disruptions from Russia’s war against Ukraine have sent prices up in recent months. Those pressures have added to already-high inflation as demand surged last year from the reopening of the economy and aggressive government stimulus.

Bringing inflation down to the Fed’s 2% goal while maintaining a strong labor market will be “very challenging,” Mr. Powell said Wednesday. “The events of the last few months around the world have made it more difficult for us to achieve what we want.”

Since Mr. Powell’s last appearance before the House panel on March 2, the Fed has raised rates three times from near zero to a range between 1.5% and 1.75%, including a 0.75-percentage-point rate rise last week, the largest in 28 years. Mr. Powell and several colleagues have signaled that another increase of that magnitude could be warranted at the Fed’s next meeting, July 26-27.

The Fed’s 0.75-percentage-point rate increase marked an abrupt change from unusually precise guidance delivered by many members of the rate-setting Federal Open Market Committee, who had indicated ahead of their meeting that they would raise rates by a smaller half percentage point, as they did in May.

Mr. Powell said the committee decided to approve the larger rate rise because of concerns over recent data on inflation and inflation expectations. Fed officials say expectations of future inflation can be self-fulfilling. If those expectations are rising, the Fed could be required to lift rates to levels that push even harder on the monetary brakes.

“I was persuaded that it was important that we make this move now and not wait and telegraph it and do it six weeks later, for example,” Mr. Powell said Wednesday.

Officials want to move rates quickly to levels that, at a minimum, no longer provide stimulus to the economy. The Fed’s short-term policy rate “is still at a relatively low level,” Mr. Powell said. “And in principle, we want to get it to a more neutral-ish level even more expeditiously than we had been.”

Write to Nick Timiraos at [email protected]

His remarks underscore the challenge facing the central bank as it raises interest rates at the most rapid clip since the 1980s to slow the economy and cool inflation.

Rising fuel costs and supply-chain disruptions from Russia’s war against Ukraine have sent prices up in recent months. Those pressures have added to already-high inflation as demand surged last year from the reopening of the economy and aggressive government stimulus.

Bringing inflation down to the Fed’s 2% goal while maintaining a strong labor market will be “very challenging,” Mr. Powell said Wednesday. “The events of the last few months around the world have made it more difficult for us to achieve what we want.”

Since Mr. Powell’s last appearance before the House panel on March 2, the Fed has raised rates three times from near zero to a range between 1.5% and 1.75%, including a 0.75-percentage-point rate rise last week, the largest in 28 years. Mr. Powell and several colleagues have signaled that another increase of that magnitude could be warranted at the Fed’s next meeting, July 26-27.

The Fed’s 0.75-percentage-point rate increase marked an abrupt change from unusually precise guidance delivered by many members of the rate-setting Federal Open Market Committee, who had indicated ahead of their meeting that they would raise rates by a smaller half percentage point, as they did in May.

Mr. Powell said the committee decided to approve the larger rate rise because of concerns over recent data on inflation and inflation expectations. Fed officials say expectations of future inflation can be self-fulfilling. If those expectations are rising, the Fed could be required to lift rates to levels that push even harder on the monetary brakes.

“I was persuaded that it was important that we make this move now and not wait and telegraph it and do it six weeks later, for example,” Mr. Powell said Wednesday.

Officials want to move rates quickly to levels that, at a minimum, no longer provide stimulus to the economy. The Fed’s short-term policy rate “is still at a relatively low level,” Mr. Powell said. “And in principle, we want to get it to a more neutral-ish level even more expeditiously than we had been.”

Write to Nick Timiraos at [email protected]