Federal Reserve Chair Jerome Powell looks on as he testifies before a U.S. House Financial Services Committee hearing on Capitol Hill in Washington, U.S., March 2, 2022.
Federal Reserve Chair Jerome Powell looks on as he testifies before a U.S. House Financial Services Committee hearing on Capitol Hill in Washington, U.S., March 2, 2022. Reuters / TOM BRENNER

The U.S. central bank must move "expeditiously" to bring too-high inflation to heel, Federal Reserve Chair Jerome Powell said on Monday, adding that it could use bigger-than-usual interest rate hikes if needed to do so.

"The labor market is very strong, and inflation is much too high," Powell said in remarks prepared for delivery to a National Association of Business Economics conference. "There is an obvious need to move expeditiously to return the stance of monetary policy to a more neutral level, and then to move to more restrictive levels if that is what is required to restore price stability." Story:

STOCKS: The S&P 500 erased a small gain and was down 0.22%

BONDS: The 10-year U.S. Treasury note yield rose to 2.2987%; The yield on 2s rose to 2.12%

FOREX: The U.S. dollar index ticked up 0.1%

COMMENTS:

KEVIN FLANAGAN, HEAD FIXED INCOME STRATEGY, WISDOMTREE INVESTMENTS, NEW YORK

"This is not just going to be a near-term tactical phenomenon. This is a more strategic type of messaging, I think, from the Fed.

"This is going to be an ongoing process. First removing emergency policy measures and then getting to restrictive territory, and that's what I was hearing today from Powell.

"They raised rates last week, we're starting at zero. We're not starting at 2% or 3% on the fed funds rate. There is runway before you get to restrictive territory, that monetary policy is no longer providing stimulus for the economy. But how quickly does the Fed close that gap? That's going to be something the market is going to be watching very, very carefully."

SAMEER SAMANA, SENIOR GLOBAL MARKET STRATEGIST, WELLS FARGO INVESTMENT INSTITUTE, ST. LOUIS

"He keeps saying the same thing over and over, that we've got to get inflation down and whatever it takes that's what we're going to do. The market unfortunately is hanging on to old norms, that they'll just do a quarter (of a percentage point) every time."

"The Fed is kind of rewriting that playbook: We may have to go every meeting. We may have to do something more than 25 basis points, and we might have to do rate hikes and quantitative tightening at the same time."

"In some ways, in some ways the Fed has been laying out these markers for months and the market is still struggling to get on the same page. The Fed's been out for months saying it's going to raise rates for some time. For Powell to say what the dot plot showed last week, how can that catch the market off guard?"

"When the dots were initially released it sold off and then it rebounded as the day rolled on. Powell soothed the market saying look we're still trying to engineer a soft landing. The base case isn't to engineer a recession to get inflation under control. He said something similar today."

"It wouldn't surprise us if the knee jerk reaction was to sell and the end of the day we'd be higher.'

OLIVER PURSCHE, SENIOR VICE PRESIDENT, WEALTHSPIRE ADVISORS, NEW YORK

"It's Powell's statement that inflation is 'much too high.' Three months ago, it was 'transitory,' a month a go it was 'elevated' and today it's 'much too high.' That's a hell of a progression. And the market is trying to figure it out, what those statements mean as it pertains to interest rate hikes and whether it increases the likelihood of a couple of 50 basis point hikes down the road."

"Having said that, I think it's incredibly important to remember that on Wednesday, Powell stressed the fact that (the Fed) will continue to course adjust based on economic data. So nothing is written in stone."

JOE SALUZZI, CO-MANAGER OF TRADING, THEMIS TRADING, CHATHAM, NEW JERSEY

"What I'm looking at here is just the market reacting to potential hawkish Fed but I don't think there's anything new here so far."

"This is an oversold market and this quick reaction is based on the headline. Let's see if they can digest it a little bit more and see what he's really saying because with the headline the algorithms will move quickly and when one moves they all move and volatility spikes in the market. In other words, you get a quick reaction that is sometimes not warranted and my gut would say that this one is not warranted."

(Compiled by the Global Finance & Markets Breaking News team)