He also claimed that the Fed does not intend to sit by and allow inflation to climb unabated. “We will use our tools to make sure that higher inflation does not become entrenched,” Power said.
Rate hikes are just one tool in the Fed’s toolbox for combatting inflation, albeit one it has deployed before, specifically during President Jimmy Carter’s term, when Federal Reserve Chairman Paul Volcker hiked interest rates to over 10%.
Some market experts are bracing for the Fed to raise rates numerous times in 2022 and 2023.
Federated Hermes’ Chief Equity Analyst Phil Orlando, a longtime bull, told CNBC that with inflation nearing 30-year highs, he expects the Fed to raise interest rates five times starting in the second half of 2022. But with Powell’s tone changing dramatically during congressional testimony today, soome believe those hikes could come earlier.
“Our best guess is we’ll see two quarter point rate hikes out of the Fed in the second half of next year and possibly four more quarter point rate hikes over course of calendar year ’23,” Orlando said.
“While the Fed is talking a good game…their actions would suggest they understand the magnitude of the problem and will remove accommodations at a reasonable pace over next two year or so to get their arms around inflation and see if they can get the genie stuck back in the bottle,” he added.
Despite the turmoil, Orlando predicted another 100-point gain in the S&P 500 by mid-year 2022.