US Fed signals rake hike in March: Key takeaways from Chairman Jerome Powell’s presser

U.S. Federal Reserve Chair Jerome Powell

In a bid to fight inflation, the US Federal Reserve said in its January meeting it was likely to hike interest rates in March and reaffirmed plans to end its bond purchases that month. With subsequent interest rate hikes, and eventual reduction in Fed’s asset holding, the central bank hopes to bring down the inflation - which soared to 7 percent, highest in four decades – to 2 percent.

Here are key takeaways from Fed Chairman Jerome Powell presser:

Need to be Nimble

"We are going to need to be, as I've mentioned, nimble about this. The economy is quite different this time." Today, inflation is near a 40-year high and the unemployment rate, at 3.9 percent, is within touching distance of the Fed's goal of maximum employment. "As we work our way through this, meeting by meeting, we are aware that this is a very different expansion...Those differences are likely to be reflected in the policy that we implement," said Powell, who used the word "nimble" at least three times.

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The pace of rate hike

Powell did not exactly detail the pace of the rate hike and said, “that it was important to be “humble and nimble” and that “we’re going to be led by the incoming data and the evolving outlook.”

Inflation target 2 percent

Powell repeatedly emphasised that the Fed's primary job now was to bring down inflation closer to its 2 percent goal. "What we need here is another long expansion...that's going to require price stability. That's going to require the Fed to tighten interest rate policy and do our part in getting inflation back down to our 2 percent goal," Powell said.

Strong job market

The unemployment rate in the US has dropped to 3.9 percent, from its peak of 14.7 percent at the worst economic point in the COVID-19 pandemic and near its February 2020 level of 3.5 percent. “There are many millions more job openings than there are unemployed people,” Powell said. “I think there’s quite a bit of room to raise interest rates without threatening the labour market.”