The U.S. Federal Reserve may need to return to bigger interest rate hikes if the economy continues to be strong and high inflation persists, Chair Jerome Powell said Tuesday.
"The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated," Powell said in a hearing of the Senate's banking committee.
Powell suggested that the U.S. central bank is still struggling to cool the economy and bring inflation, which is at 40-year highs, back to its long-term goal of 2 percent.
"If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes," he said in the first part of his two-day semiannual monetary policy testimony before Congress.
The Fed will convene its next policy meeting on March 21 and 22. Powell's first remarks before the committee since June last year have raised expectations that the Fed will lift its key interest rate by 0.5 percentage point in the upcoming meeting.
At the previous meeting of the policy-setting Federal Open Market Committee in early February, the Fed approved another in a series of rate increases, but at a slower pace of 0.25 percentage point.
It represented the smallest incremental move since March last year, when the Fed began its current tightening cycle in an attempt to tame stubborn inflation.
The decision lifted the federal funds rate, which banks charge each other for overnight borrowing, to a new target range of 4.50 to 4.75 percent.
