Dollar up slightly after Powell inflation comments

The dollar ticked higher Monday after Federal Reserve Chairman Jerome Powell said the central bank needs to take the necessary steps to address inflation

The dollar index traded 0.1% higher at 98.32. The euro was down -0.2% against the dollar at $1.103. Against the yen, the greenback climbed 0.1% to 119.25

“The labor market is very strong, and inflation is much too high,” Powell said in prepared remarks for the National Association for Business Economics

“We will take the necessary steps to ensure a return to price stability,” he said. “In particular, if we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so. And if we determine that we need to tighten beyond common measures of neutral and into a more restrictive stance, we will do that as well

Powell’s comments follow remarks from Atlanta Fed Bank President Raphael Bostic, who said he sees six rate hikes this year and two for 2023

Markets have been volatile over the past month as the situation in Ukraine has escalated, increasing the prices of commodities such as energy and putting upward pressure on already high inflation

The Fed raised its key interest rate by 25 basis points last week for the first time since 2018 as it attempts to combat rising prices while trying to avoid a policy error which could send the U.S. economy into recession. Investors are now focused on the potential speed and size of future rate hikes

“The Fed is really constrained only by developments un Ukraine, because they are afraid of a recession, now there aren’t any real recession signs out there that we have seen, but they have to be thinking about it,” said Joseph Trevisani, senior analyst at FXStreet.com

“The Fed has established its policy, but it is not a free ride by any means, even if you just take the inflation side, it is not a free ride because they don’t know what the economy is going to do.