Dow Jones plummets 400 points after Fed chair warned of further rate hikes trends now Wall Street's major stock indexes were falling on Tuesday, after the Federal Reserve warned it could speed up its interest rate hikes if inflation continues to run rampant. In midday trading, the Dow Jones Industrial Average was down 398 points, or 1.19%, to 33,033, while the benchmark S&P 500 lost 0.87% and the tech-heavy Nasdaq composite dropped 0.40%. Inflation and and the Fed's attempts to tame it by cooling the economy through rate hikes have been at the center of Wall Street's sharp swings this year. After seeming to be on a steady decline since last summer, reports on inflation came in surprisingly hot last month, alongside strong jobs and consumer spending data that showed little weakening in demand. Tuesday's slump on Wall Street followed Fed Chair Jerome Powell's testimony in a Senate hearing, where he warned the recent data mean 'the ultimate level of interest rates is likely to be higher than previously anticipated.' Wall Street's major stock indexes were falling on Tuesday, after the Federal Reserve warned it could speed up its interest rate hikes if inflation continues to run rampant In midday trading, the Dow Jones Industrial Average was down 398 points, or 1.19%, to 33,033 He also said in his testimony that the Fed is ready to increase the pace of its hikes again if needed. That would be a sharp turnaround after it had just slowed its pace of increases to 0.25 percentage points last month from earlier rate hikes of 0.50 and 0.75 points. 'If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes,' Powell said. 'Restoring price stability will likely require that we maintain a restrictive stance of monetary policy for some time.' 'With markets fully focused on Fed Chair Powell’s remarks today, it did not take him long to deliver the goods,' noted Jesse Wheeler, economic analyst at decision intelligence company Morning Consult. 'Following Powell's hawkish remarks, all eyes will be on the BLS jobs report out this Friday, with investors looking for any signs that the labor market may be cooling, which could allow the Fed to ease its stance somewhat,' added Wheeler. In his testimony, Powell also claimed Congress' spending had little impact on inflation. In response to a line of questioning from Sen. John Kennedy, R-La., on what Congress could do to aid in fighting inflation, Powell said ' I don't think fiscal policy right now is a big factor driving inflation at this moment.' It's a notable remark as the Fed chair typically tries to steer clear of commenting on fiscal policy. The benchmark S&P 500 lost 0.87% in midday trading after Powell's remarks The tech-heavy Nasdaq composite dropped 0.40% shortly after noon on Tuesday Inflation and and the Fed's attempts to tame it by cooling the economy through rate hikes have been at the center of Wall Street's sharp swings this year Powell told the committee 'that the ultimate level of interest rates is likely to be higher than previously anticipated,' and 'If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.' The Fed's target range for interest rates currently sits at 4.5 to 4.75 percent. Prices in January was up 6.4 percent over the previous year and 0.5 percent over the previous month, per the Consumer Price Index . That was slightly lower than December's figures but still far higher than the Fed's goal. The Federal Reserve could press on with rate hikes if inflation does not begin to fall faster and the economy doesn't cool off, chair Jerome Powell told Senators on the Banking Committee on Tuesday The central bank raised its benchmark rate by a quarter-point in early February after imposing a half-point increase in December and four three-quarter-point hikes before that. Over the past year, the central bank has raised its key rate, which affects many consumer and business loans, eight times. Economists had expected the Fed to increase rates by 0.25 percentage points, or 25 basis points, when it next meets March 21-22. Powell's remarks now suggest that hike could be as much as 50 basis points. Banking Committee chair Sen. Sherrod Brown tore into the Fed's persistent rate hikes. 'This is a complex problem and interest rates are a single, blunt too,' Brown, D-Ohio, said. January marked the seven straight month of declining annual inflation from this summer's peak of more than 9% The Federal Reserve has raised its target interest rate by a quarter of a percentage point, slowing down from the rapid hikes implemented last year Powell also warned that rate hikes could happen with greater frequency 'Raising interest rates certainly won't stop big corporations from exploiting all of these crises to jack up prices far beyond the increase in their costs,' he added, ticking off other factors contributing to inflation like the Russian war on Ukraine. Sen. Tim Scott, top Republican on the committee, hit back that the Fed would not have to institute these hikes if Congress had kept its federal spending in check. 'We will continue to make our decisions meeting by meeting,' Powell said. 'Although inflation has been moderating in recent months, the process of getting inflation back down to 2% has a long way to go and is likely to be bumpy.' Consumer inflation was up 6.4% from a year ago in January, higher than economists had expected. While January marked the seventh straight month of declining annual inflation from this summer's peak of more than 9%, it also represented a smaller drop than expected from December's number, leading some economists to fear the fight against soaring prices could stall out. More fireworks may arrive later this week and into next as the Fed gets more data points that will surely help shape its decision making ahead of its next meeting on interest rates later this month. On Friday will come the U.S. government's monthly jobs report. Within that, most of the attention will be on how high wages are going for workers. The fear at the Fed is that too-strong gains could lead to more upward pressure on inflation. Then two reports next week will give updates on how high inflation remains at both the consumer and at the wholesale levels. 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