POWELL: FED TO KEEP RATES HIGHER FOR LONGER TO CUT INFLATION

The Federal Reserve will push rates higher than previously expected and keep them there for an extended period, Chair Jerome Powell said Wednesday in remarks likely intended to underscore the Fed’s single-minded focus on combating stubborn inflation.

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Yet in a speech at the Brookings Institution, Powell also signaled that the Fed may increase its key interest rate by a half-point at its December meeting, a smaller boost after four straight three-quarter point hikes. Rate increases could then fall to a more traditional quarter-point size at its February and March meetings, based on previous Fed forecasts.

Powell said the Fed is seeking to increase its benchmark rate by enough to slow the economy, hiring, and wage growth, but not so much as to send the U.S. into recession.

It has lifted the rate six times this year to a range of 3.75% to 4%, the highest in 15 years. Those increases have sharply boosted mortgage rates, causing home sales to plunge, while also raising costs for most other consumer and business loans.

“We think that slowing down at this point is a good way to balance the risks,” Powell said. “The time for moderating the pace of rate increases may come as soon as the December meeting,” which will take place Dec. 13-14.

Financial markets rallied in response to Powell’s suggestion that rate increases will slow. The S&P 500 jumped 122 points, or 3.1%. It had fallen before Powell spoke.

But Powell also stressed that smaller hikes shouldn’t be taken as a sign the Fed will let up on its inflation fight anytime soon.