Fed’s Powell Announces Larger Than Expected Rate Increases ‘To Control Inflation’

March 8, 2023, 2022 (EIRNS)—Federal Reserve Chairman Jerome Powell testified before the Senate Banking Committee on Tuesday, March 7 and then the House Financial Services Committee on Wednesday, March 8 and delivered a message that the Fed would continue to raise interest rates, and probably with larger increases than the markets had expected. MarketWatch summarized the mood on Wall Street after Powell’s testimony: “Stock Market Could ‘Take It Hard’ as Expectations Grow for a 6% Fed Funds Rate.” The U.S. hasn’t seen a Fed rate that high in over two decades.

Powell blamed it all on inflation that is not under control, stating: “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.” The markets interpreted this to mean that, instead of the smaller .25% increase widely expected, there will be a .50% increase on March 22 when the Federal Open Market Committee (FOMC) meets, and that there will be similar 0.50% increases at least two more times this year.

The Dow Jones plunged by 575 points on March 7 in response. The dollar soared on Forex markets, indicating serious capital flight out of other countries, especially the developing sector. And the ECB, the Swiss and other central banks indicated they would be following suit. The impact that these tightening moves will have on the grossly over-extended international speculative bubble of $2 quadrillion will be dramatic—with whole chunks of the “everything bubble” likely to go belly-up. One leading candidate is the global commodity market, which has reportedly been subjected to growing margin calls as interest rates have inched up.

Sen. Elizabeth Warren (D-MA), who voted against Powell’s re-appointment in late 2021 (she reportedly wanted the job herself), went after Powell at the Senate hearings: “So Chair Powell, if you could speak directly to the 2 million hard-working people who have decent jobs today, who you’re planning to get fired over the next year, what would you say to them? How would you explain your view that they need to lose their jobs?”

To which Powell responded lamely that “we are taking the only measures we have to bring inflation down.”