Fed will raise rates more aggressively if needed, Jerome Powell say

"The labor market is very strong, and inflation is much too high," Powell told a National Association for Business Economics conference.

Federal Reserve Chair Jerome Powell on Monday delivered his most muscular message to date on his battle with too-high inflation, saying the central bank must move "expeditiously" to raise rates and possibly "more aggressively" to keep an upward price spiral from getting entrenched.

He added, "if we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so."

AIG's global head of strategy, Constance Hunter, called it Powell's "the buck stops here" speech.

Most Fed policymakers see the "neutral" level as somewhere between 2.25% and 2.5%.

The U.S. unemployment rate currently is at 3.8% and per-person job vacancies are at a record high, a combination that's pushing up wages faster than is sustainable.

Inflation by the Fed's preferred gauge is three times the central bank's 2% goal, pushed upward by snarled supply chains that have taken longer to fix than most had expected and that could get worse as China responds to new COVID-19 surges with fresh lockdowns.

Adding to the pressure on prices, Russia's war in Ukraine is pushing up the cost of oil, threatening to move inflation even higher. The United States, now the world's biggest oil producer, is better able to withstand an oil shock now than in the 1970s, Powell noted. 

Powell said he expects inflation to fall to "near 2%" over the next three years, and that while a "soft landing" may not be straightforward, there is plenty of historical precedent.

The economy is very strong and is well-positioned to handle tighter monetary policy," he said, adding that he doesn't expect a recession this year