The stock market soared, offsetting earlier losses after Federal Reserve Chairman Jerome Powell promised in a statement to the Senate on Tuesday that the central bank would not hesitate to raise rates further than forecast if higher inflation persists .
Shares were lower ahead of Powell’s testimony – with the Dow Jones Industrial Average down as much as 250 points, but all three indices cut losses by noon after his comments.
The Dow rose 0.5%, nearly 200 points, while the S&P 500 rose 0.9% and the Nasdaq Composite rose 1.4%.
Powell, who is expected to win a second term as Fed chairman, faced questions at his Senate hearing about how the central bank will adjust monetary policy to fight inflation.
Although the economy is expanding at the “fastest pace in many years” and the labor market remains “strong” according to the Fed chairman, challenges such as higher inflation and a “mismatch between supply and demand” remain.
While Powell forecast that supply chain problems would normalize later this year, which should ease inflationary pressures, he said the Fed will not be afraid to hike rates further than forecast if inflation stays high.
Earlier, at its monetary policy meeting last month, the Federal Reserve signaled that there will likely be three rate hikes this year, with the first coming in March.