Fed Chair Powell says he expects to raise rates at March meeting

Yahoo Finance's Brian Cheung breaks down Fed Chair Powell's statement on the economy ahead of his testimony before Congress.

Video Transcript

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JULIE HYMAN: Just before 10:00 AM on this Wednesday, March 2, we are awaiting commentary from Jay Powell in just a moment. I'm Julie Hyman. That right there is Brian Sozzi. Sozz?

BRIAN SOZZI: Yeah, we're seeing some interesting market action here, Julie. Green across the screen despite, uh, the continued advance in oil prices here, too. Also, we're getting some-- an advanced look and comments from Fed chief Jerome Powell suggesting that March is likely to bring that first interest rate hike. I want to get right to Brian Cheung has more on those comments. Brian.

BRIAN CHEUNG: Yeah, we are waiting Fed Chairman Jay Powell's testimony to the House Financial Services Committee. That's supposed to be kicking off at 10:00 AM, of course, give or take a few minutes. But we did already get his prepared remarks as submitted to the House Financial Services Committee.

The Fed chairman noting that, quote, "We expect it to be appropriate to raise rates in their next meeting." That's going to be happening on March 16. So it seems like at least for right now, the geopolitical tensions out of Ukraine have not dissuaded the Federal Reserve policy setting committee from wanting to raise rates as they had messaged over the last few months.

Now, on the labor market, they did describe conditions as, quote, "extremely tight." And interestingly, they noted that widespread benefits have happened for those on the lower end of the wage spectrum. This is very important commentary, because over the last few months we had seen some of the more dovish members of the Fed perhaps want to stave off any sort of interest rate hike because they wanted to pull in some of those more marginalized workers. But the Fed chairman, the top dog himself, now saying that he feels like the labor market is in a good place to then begin tightening again.

You can see Jay Powell shaking hands with lawmakers in the committee ahead of that, uh, hearing. But what's important here is we did get some added commentary from the Fed chairman with regards to the Russia-Ukraine situation, which has developed very quickly over the past few days. Uh, here's the money shot quote, quote, "The near-term effects on the US economy of the invasion of Ukraine, the ongoing war, the sanctions, and of events to come remain highly uncertain."

So it's not like the Federal Reserve is necessarily holding their hat and hinging future policy on the outcome of what's going to happen in Ukraine, but the Fed just simply saying, look we're monitoring the situation. Obviously, things are progressing very quickly. If that does spill over into some sort of US economic effect, then the Fed could adjust as needed. But again, not saying it's necessarily there at that point, but again we'll see what the Fed chairman says once that hearing does get underway in a few minutes, guys.

JULIE HYMAN: We will. And it's interesting as well because one of the other comments that came from President Biden last night, of course, he talks a lot about inflation, trying to attack inflation. And he also exhorted Congress to confirm his nominees to the Federal Reserve. That's a process that-- where do we even stand in that process, Brian?

BRIAN CHEUNG: Yeah, there's a lot of moving parts here. And it's important to remember that the committee that he's testifying to today really doesn't have jurisdiction over those nominees. Really it's the Senate Banking Committee where he'll be testifying tomorrow. So Maxine Waters, you can see on the screen ahead of you, preparing to begin her remarks.

It is not necessarily part of that process, but we spoke with Bharat Ramamurti over at the National Economic Council who said he's optimistic that they can ultimately get those nominees confirmed. There just might be a little bit more of a delay as Republicans try to stymie those efforts. They want to take a deeper look into Sarah Bloom Raskin who is the pick for vice chair of supervision. They want to look specifically into her dealings with the fintech company called Reserve Trust alongside her views on climate change. So they'll be watching for that as well.

So obviously, the Senate Banking Committee might be the venue tomorrow where we'll expect to hear a little bit more commentary. But again, in this particular hearing, you shouldn't expect to see the Fed chairman be pressed on what's going to happen with those five nominees. Fed Chairman Jay Powell is actually one of those nominees. There's a weird technicality where, actually, his term as Fed chairman expired, but he's still pro tempore and serving in that transitionary role.