Jerome Powell Discusses Need to Continue Raising Interest Rates to Control Inflation

Federal Reserve Chairman Jerome Powell spoke to the Economic Club of Washington, D.C. on Tuesday, discussing the need for the Fed to continue raising interest rates in order to control inflation.[0] Powell said that if the economic data continues to be strong, the Fed may need to raise rates higher than previously anticipated.[1]

The Fed increased its funds rate by 25 basis points last week, a slower jump than the 0.5% in December and far less than the four-straight 75 basis-point increase earlier in 2022.[2] The CME Group’s FedWatch tool now has a 91% chance that the Fed will again raise interest rates by 50 basis points from 3% to 9%.[2]

Powell noted that the job market is “extraordinarily strong” and that it is likely to take a significant amount of time before inflation is brought down to the 2% target.[0] He added that rates will have to remain in a restrictive territory for some time and that the process “is not going to be we think smooth. It’s probably going to be bumpy”.[3]

The US trade deficit was slightly smaller than expected in December, with a -$67.4b reading, after the advanced reading for the goods side.[0] For 2022, the US trade deficit widened to a record high of -$106.4b in March but then narrowed to a 2-year low of -$61.0b in November.[0]

Chipotle (CMG) shares sank more than 5% after the burrito-maker’s earnings disappointed as higher costs for tortillas, dairy, beans, and rice, as well as labor costs, ate into profitability.[4] New Relic reported quarterly results that soundly beat estimates and rose 20%.[5]

The S&P 500 experienced a decrease of 0.2%, while the Nasdaq Composite remained nearly unchanged.[6] The Dow Jones Industrial Average decreased by 0.5%.[6] The Federal Reserve’s December meeting revealed that most officials anticipate that interest rates will reach around 5.1% eventually, meaning that there will be 0.25% increases at their March and May meetings.[7]

Overall, the Fed chair’s message was that the US is in a good spot, with a strong labor market and beginning disinflation, but that more rate increases may be needed to bring inflation down to the 2% target and that the process “is likely to take quite a bit of time”.[3]

0. “Stocks Rally as Fed Chair Powell Is Less Hawkish Than Feared” Barchart, 7 Feb. 2023,

1. “Fed says more interest rate rises needed to cool inflation” The Guardian, 7 Feb. 2023,

2. “Powell Warns Another Hot Jobs Report Could Trigger More Rate Hikes—Here’s What That Means For The Stock Market” Forbes, 7 Feb. 2023,

3. “Gold price digests Fed Chair Powell’s mixed messages around disinflation and more rate hikes” Kitco NEWS, 7 Feb. 2023,

4. “Stock market news live updates: Stocks fall after Powell remarks, as earnings rush in” Yahoo News, 8 Feb. 2023,

5. “Dow Jones Falls Ahead Of Fed Speakers; Chipotle Dives On Earnings; Uber Surges On Outlook” Investor’s Business Daily, 8 Feb. 2023,

6. “Stocks Close Higher After Powell Remarks – WSJ” The Wall Street Journal, 7 Feb. 2023,

7. “The Fed, Biden using the 70s inflation ‘playbook’ to solve supply problem, market expert says” Fox Business, 8 Feb. 2023,