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The Federal Reserve raised interest rates by half a percentage point and announced a plan to shrink its massive bond holdings.
The Fed raised its benchmark interest rate by half a percentage point on Wednesday, and Powell said additional increases will be on the table.
The Fed has taken a course of withdrawing support from the economy by shrinking its balance sheet at the same time it is raising rates. As money becomes more expensive to borrow, the twin policies are likely to spread through markets and the economy.
The central bank is getting serious about cooling down the economy and job market as rapid inflation persists and as officials grow nervous that it could become more permanent. Prices have been increasing at a rapid pace for months.
Mr. Powell said at his news conference that inflation is too high and that they are moving quickly to bring it down.
There is a broad sense on the committee that additional 50 basis point increases should be on the table at the next couple of meetings.
As supply shortages moderated and the economy began to recover from early-pandemic disruptions, policymakers spent much of the year hoping that inflation would ease on its own. Inflation has only increased, and has yet to return to normal. Prices for goods, food and fuel are going up because of the war in Ukraine. Wages are rising rapidly in the United States, which feeds into higher prices for services as consumer demand remains strong.
The invasion of Ukraine is likely to create additional upward pressure on inflation, as well as the supply chain disruptions in China, which are likely to weigh on economic activity.
Fed officials decided that they no longer have the luxury of waiting for inflation to moderate on their own as shocks continue to roil global supply. Mr. Powell did not approve of more aggressive rate increases. Mr. Powell said that the committee is not considering a 0.75 percentage point increase.
After Mr. Powell said that the fight against inflation would not push the economy into a recession, stocks on Wall Street rallied. The S&P 500 rose more than 2.3 percent.
The chief executive of a financial management firm said that market watchers were starting to think that a 75 basis point increase was a possibility. The stock market on Wednesday reflected the fact that investors weren't expecting anything from the Fed.
It's difficult to decide how quickly to remove policy support. Central bankers want to arrest the rise in prices without causing the economy to go into a recession. A soft landing is likely to be a challenge.
Mr. Powell said that this will be very challenging, but that he thinks we have a good chance.
He believes the Fed has a good chance of restoring price stability without a recession.
The Fed will allow securities to mature without reinvestment in June. It said on Wednesday that it will let up to $60 billion in Treasury debt expire each month. As of September, that plan will have been phased in.
The Fed's plan to reduce its holdings is likely to take steam out of financial markets and could help to cool the housing market as it lifts longer-term borrowing costs, reinforcing the effect of the central bank's interest rate increases. The Fed's anticipated moves have begun to push mortgage rates higher.
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