Investing.com – In his first congressional hearing as head of the Federal Reserve this week, vowed to prevent the economy from overheating while sticking with a plan to gradually raise interest rates.
“We have seen continued strength in the labor market, we have seen some data that will in my case add some confidence to my view that inflation is moving up to target, we have also seen continued strength around the globe and we have seen fiscal policy become more stimulative,” he said.
Those comments rekindled speculation in equity markets over U.S. monetary tightening happening faster than expected this year.
Indeed, many economists have started to forecast four rate hikes this year, compared to the three the Fed currently predicts.
The U.S. central bank is widely expected to raise interest rates at its March 21 meeting and release new forecasts for inflation and interest rates that could signal more hikes than currently expected.
A recent correction in equity prices, during which the three major U.S. stock indices briefly sank more than 10% each, had led some investors to contemplate the chance the Fed would pull back from raising interest rates.
But unless the market plunge intensifies and actually damages the economy, the Fed is unlikely to budge from its plan to further raise borrowing costs this year, analysts said.
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Source: Investing.com
