Powell says last week's rate hike improved the Fed's fight against inflation, and more may be needed

The increase was the Federal Reserve's first since 2023. Powell says the Fed may need to raise rates again, and other officials also see further tightening as likely.

Fed Chair Jerome Powell says last week's rate hike put the central bank in a better position to fight inflation. The increase was the Fed's first since 2023.

Powell says the Fed may need to raise interest rates again to bring inflation down to its 2% goal. He describes the hike as a step that strengthened the Fed's position against inflation, not as a response to inflation data alone.

Other officials have been laying out their own reasoning in recent days. Fed Governor Michael Barr says more rate hikes are likely needed to bring inflation down to the Fed's 2% goal, arguing that inflation risks now outweigh concerns about the labor market. St. Louis Fed President Alberto Musalem has joined Barr in seeing further tightening as likely, depending on incoming data. Atlanta Fed President Raphael Bostic has drawn a distinction between near-term and long-term inflation expectations, calling the short-run figures encouraging but not the longer-run ones. New York Fed President John Williams says the era of explicit forward guidance from the Fed is over.

Markets are pricing in 2 more rate hikes. That pricing formed after Barr's remarks.

The Fed is moving meeting by meeting rather than following a preset path, in line with Williams' comments that forward guidance has ended. With several officials signaling that further tightening may be needed and inflation still sticky, Powell's comments keep the rate path uncertain. Investors are treating that backdrop as neutral to slightly negative for equities, given the emphasis on inflation that has not gone away.