25 or 50 basis points will depend on coming economic data: Powell

January US job openings dip, but still high at 10.8 million

Federal Reserve Chair Jerome Powell stressed that policymakers had not yet made up their minds on the size of their interest-rate increase later this month and said it would hinge on incoming data on jobs and inflation.

“We have not made any decision about the March meeting,” Powell told the House Financial Services committee on Wednesday during his second day of testimony before Congress. 

“We are not on a pre-set path and upcoming data will help determine whether a 25 basis point or 50 basis point rate rise will be needed at the officials’ next gathering,” Powell said. The Fed chief repeated his message from Tuesday that the US central bank is likely to take rates higher than previously anticipated and that it could move at a faster pace if economic data keeps coming in hot. But on Wednesday he diverged slightly from his prepared remarks to qualify the statement by adding that “no decision” had been made.

“If — and I stress that no decision has been made on this — but if the totality of the data were to indicate that faster tightening is warranted, we’d be prepared to increase the pace of rate hikes,” he said.

Investors upped their bets that the central bank could raise interest rates by 50 basis points when it gathers later this month instead of continuing the quarter-point pace from the previous meeting. They also saw the Fed taking rates higher, projecting that the Fed’s policy benchmark will peak at around 5.6 per cent this year, up from 5.5 per cent on Monday.

The Fed began aggressively raising interest rates a year ago, bringing the target on its benchmark rate to a range of 4.5 per cent to 4.75 per cent in February. 

US job openings

Vacancies at US employers retreated at the start of the year but remained historically elevated, highlighting persistent labor tightness that supports a higher level of interest rates from the Federal Reserve.  

The number of available positions decreased to 10.8 million in January from an upwardly revised 11.2 million a month earlier, the Labor Department’s Job Openings and Labor Turnover Survey, or JOLTS, showed Wednesday.

The median estimate in a Bloomberg survey of economists called for 10.5 million openings.  The JOLTS release included the agency’s annual revision of monthly data back to January 2018. Almost every reading of job openings in the past year was revised higher, including a new record of 12 million in March 2022.