Fed Chair Powell: Rate increase appropriate in March, implications of Ukraine/Russia was highly uncertain

by · FXStreet

Fed Chair Jerome Powell, in the pre-release of his opening remarks at Wednesday's testimony before the US Congress, said that he expects it to be appropriate to raise interest rates at the coming March meeting. Powell said that the Fed is monitoring the situation in Ukraine, the impact of which on the US economy is "highly uncertain".

Powell reiterated that the Fed needs to be "nimble" in responding to incoming economic data and the evolving economic outlook and reiterated his call for balance sheet reduction to begin after rate liftoff has begun. Powell did not mention anything about the magnitude of the coming rate hike in March or any thereafter. The base case according to money market pricing is that the Fed will hike interest rates by 25bps. 

Market Reaction

Powell's remarks have not come as a surprise to market participants and thus the DXY has not moved. Attention now turns to the Q&A portion of his testimony.