Powell, chairman of the Federal Reserve, said the Fed's commitment to raising interest rates "quickly" to reduce inflation was "absolutely necessary" and that the view of "early adjustment" was justified, including a 0.5 percentage point increase in interest rates next month.

Powell attended a seminar hosted by the International Monetary Fund (IMF) in Washington on Thursday. It was Powell's last public speech before the Fed's blockbuster FOMC meeting in May. ECB President Christine Lagarde also attended the meeting.

Powell affirmed his determination to reduce inflation and said interest rates could rise sharply as early as next month."in my opinion, it is appropriate to quicken the pace of raising interest rates. I also think it is appropriate to make any adjustments in advance. I would say that a 50 basis point increase in interest rates will be discussed at the meeting in May. "

The Wall Street Journal commented that Powell's speech kept the market's expectations of a 50 basis point rate hike in May unchanged. Powell also hinted at the possibility of raising interest rates by the same amount in the future.Fed officials have generally expressed a desire to raise interest rates to levels that do not provide stimulus.

Powell's interest rate hike of the above 50 basis points implies that it is basically in line with market expectations. He first gave the possibility of raising interest rates by 50 basis points in May for the first time last month. This expectation has been growing since then. The current consensus in the market is that the Fed will speed up the pace of raising interest rates, rather than raising rates by just 25 basis points at a meeting in the face of the fastest inflation in more than 40 years.

During Powell's speech, the overall decline in US stocks widened, and the market forecast for a rise in interest rates was more aggressive. The market expects the probability of raising interest rates by 50 basis points in May to rise to 97.6 per cent. Traders expect another similar rate hike by the end of the year, bringing the federal funds rate to 2.75%.

In response to the market reaction, Powell said, the market is dealing with what we see. Generally speaking, the market reaction is appropriate, but he does not want to support any particular market pricing. However, he pointed out that the minutes of the March FOMC meeting showed that many officials supported one or more 50 basis point interest rate hikes to curb inflation.

Another Fed rate hike in May would be the first back-to-back rate hike by the central bank since 2006, while a 0.5 percentage point hike would be the first big rate hike since 2000.

In parallel with the rate hike is the Fed's shrinking schedule. At present, the Fed's balance sheet is close to $9 trillion, which mainly includes treasury bonds and mortgage-backed securities. The Fed is expected to shrink by $95 billion a month after that, according to the minutes of the March FOMC meeting.

Inflation, which is highly concerned by the marketPowell said it is absolutely necessary to restore price stability, without which the economy cannot function.He pointed out that inflation is indeed a global problem, but there are differences between them. He had predicted that US inflation expectations would peak around this stage, but this was not the case. It is hoped that real progress can be made in bringing down inflation. "We are committed to using our tools to bring inflation back to 2 per cent.The actual inflation peak may be in March, but we don't know.So we won't count on that. We will really raise interest rates and quickly bring them to a more neutral levelThen reach the level of austerity, and if we get there, it will prove appropriate to do so. "

For most of last year, Fed officials such as Mr Powell insisted that inflation was "temporary", arguing that it would subside as supply chain bottlenecks and excessive demand for goods abated. However, inflation has not abated the fever as expected by the Federal Reserve, which abandoned the idea that inflation is temporary a few months ago. Mr Powell said it was "disappointing" and the Fed had to change direction.

Us CPI rose 8.5 per cent year-on-year in March, the fastest pace since December 1981, higher than market expectations of 8.4 per cent and exceeding February's 7.9 per cent, according to the Bureau of Labor Statistics. CPI grew by more than 6 per cent for the sixth month in a row. The month-on-month increase in CPI continued to expand in March, up 1.2 per cent, up from 0.8 per cent in February, the biggest increase since September 2005. Excluding volatile food and energy prices, core CPI rose 6.5 per cent in March from a year earlier, up from 6.4 per cent in February and the fastest increase since August 1982. However, core CPI recorded 0.3 per cent month-on-month in March, the lowest since September 2021 and 0.5 per cent in February.

Right now, the Fed is trying to bring the economy to a soft landing. Mr Powell said the Fed's goal was to use tools to bring demand and supply back into sync so that inflation would fall and there would not be a slowdown that led to a recession. No one who works at the Fed says it will be easy. This will be very challenging. The Fed will do its best to achieve this goal.

In fact, the market is rather sceptical about whether the Fed can soften the economy. Among the many big banks on Wall Street, Deutsche Bank was the first to call the United States a recession, and recently he upgraded again, calling the economy a "hard landing." Deutsche Bank believes that a recession is certain, and that inflation expectations could soar, eventually leading to more aggressive tightening and a deeper recession, with a bigger rise in unemployment, which in turn becomes the result of what the Fed is trying to avoid.

Mr Powell says the US economy is still very strong. As for the labor market, he believes thatThe US labor market is overheated, and while "overheating" is good for workers, it is "unsustainably hot" and the Federal Reserve will cool the job market.He warned of a growing imbalance between supply and demand in the labour market, which some economists fear could trigger a wage spiral, pushing up inflation as workers raise wages.

Us non-farm data in March showed that although employment increased by only 431000, the unemployment rate was as low as 3.6 per cent, close to pre-epidemic levels, and the average hourly wage rose 5.6 per cent, the biggest increase since 2007.