After Powell's hawkish speech, Rick Rieder, a chief investment officer of BlackRock, the world's largest asset manager, warned that the US Fed could raise interest rates as high as 6% and keep them at that level for a longer period to curb inflation.
Local time, March 7 (Tuesday), Fed Chairman Powell pointed out that the Fed may accelerate the pace of rate hikes and raise the terminal interest rate to a higher-than-expected level.
Rieder said in a report on Tuesday that the Fed may have to raise the rate to 6% and then maintain that level for a longer period of time to slow economic growth and temper inflation down to nearly 2%.
The interest rate is currently 4.50%-4.75%. The dot plot released in December 2022 showed that Fed officials expected the rate to peak at around 5.1%, but investors now expect it to rise by at least another 0.5 percentage point.
Goldman Sachs also raised its peak interest rate forecast to a range of 5.5% to 5.75% on Tuesday.
Money market bets on more aggressive Fed rate hikes have gained more attention in recent weeks after a flurry of economic data showed a tight job market and stubbornly high inflation. The data revived fears that the US Fed could repeat the ultra-sharp rate hikes that battered stocks and bonds last year.
Traders had mostly expected the US Fed to raise interest rates by 25 basis points at its next meeting on March 21-22, according to CME Group, but after Powell's speech on Tuesday, the odds of a 50-basis-point rate hike surged to 73.5%.