Jerome Powell Warns of Possible Aggressive Rate Hikes and a Recession Risk

Federal Reserve Chairman Jerome Powell warned Congress on Tuesday that the central bank may have to raise interest rates higher than previously expected in order to curb stubborn inflation. This sent markets into a tailspin, as investors began to price in a 69.4% probability that the Fed will raise interest rates by another 25 basis points to a range of 4.75% to 5% on March 22, according to the CME FedWatch tool.[0] In addition, there's a 30.6% chance seen of a bigger, 50-basis-point hike.[1]

With inflation reaching its highest level in 40 years in March of last year, the Fed began raising rates. However, as more data consistently showed high inflation, predictions for the speed and strength of future rate increases have become increasingly more intense.[2] The Federal Reserve predicted that, by the conclusion of 2021, raising interest rates to 3.1% would be sufficient to contain increasing inflation.[2] The most recent prediction says that rates will reach 5.1%, but on Tuesday, Powell said that rates will “very likely” be higher than what was originally thought.[3] Slowing inflation by decreasing consumer demand through increases has already caused a dip in both the housing and stock markets, and many experts are concerned that this could eventually result in a serious international economic recession.[2]

As of late Friday, the yield on the 10-year Treasury note (TMUBMUSD10Y) was 3.962%. However, that yield rose to 3.981 On Friday late, the TMUBMUSD30Y, a 30-year Treasury bond, had a yield of 3.886%, which then climbed to 3.911%. At 3 p.m. on Monday, the yield on the 2-year Treasury note TMUBMUSD02Y rose from 4.863% to 4. The Eastern rate increased from 4.876% on[1] Prices move in the opposite direction to yields.[1]

The Federal Reserve's projections showed that, cognizant of the fact that the central bank's endeavors to decelerate the economy could lead to roughly two million Americans becoming unemployed this year, Powell accepted this.[4] At the hearing, Democrats warned against any rapid increases in interest rates, pointing out that a recession caused by the Federal Reserve would have an especially hard impact on those with lower incomes.[5]

0. “US debt default could cause ‘longstanding harm,' Fed Chair Jerome Powell says” ABC News, 7 Mar. 2023,

1. “‘Buckle up’: Treasury yields edge near 4% as Powell testimony, jobs data loom” MarketWatch, 6 Mar. 2023,

2. “How High Will Fed Raise Rates? Powell Fuels Fears That Rates Could Hit 6%” Forbes, 8 Mar. 2023,

3. “Powell: ‘A Long Way to Go' on Taming Inflation” U.S. News & World Report, 7 Mar. 2023,

4. “Jerome Powell's testimony sent markets reeling. That may be a good thing” CNN, 8 Mar. 2023,

5. “Five takeaways from Powell’s House testimony” The Hill, 8 Mar. 2023,

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