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US Federal Reserve Chair Jerome Powell. Source: GraemeJennings/ Reuters.
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  • The US Federal Reserve may raise interest rates sooner than expected following comments made by central bank policymakers in a meeting last month
  • The comments have been described as more hawkish than expected, with Fed officials showing uniform concern about the pace of price increases
  • US stocks have tumbled following the comments with the S&P 500 index down around 1.6 per cent as the yield on the two-year treasury note shot to its highest level in almost two years
  • In related news, US President Joe Biden could announce nominees for top positions on the Federal Reserve Board this week, with diversity considered a “top priority”

Central bank policymakers in the United States have hinted at a rise in interest rates sooner than expected during a meeting last month.

A document outlining the Federal Reserve meeting was released on Wednesday. It stated that it may be necessary to increase the federal funds rate sooner or at a faster pace than participants had earlier anticipated.

Attendees at the meeting also described the state of affairs as a “very tight” job market with unabated inflation. Additionally, Fed officials showed uniform concern about the pace of price increases.

According to CME Group’s FedWatch tool, the probability that the Fed would lift interest rates in March has risen to more than 70 per cent.

The possibility of higher rates and increased borrowing costs has coincided with a tumbling of US stocks. The S&P 500 index fell around 1.6 per cent.

The yield on the 2-year Treasury note, the maturity most sensitive to Fed policy expectations, shot to its highest level since March 2020.

Fed Chair Jerome Powell is due to appear before the Senate Banking Committee next week for a hearing on his nomination for a second four-year term as head of the central bank.

In related news, US President Joe Biden could announce nominees for top positions on the Federal Reserve Board as soon as this week.

White House spokesperson Jen Psaki told reporters on Tuesday that Mr Biden is making diversity a “top priority” in his selection process.

Two women, Lisa Cook and Sarah Bloom Raskin, are believed to be frontrunners for nominations. If selected a record four of seven Federal Reserve Board members will be women.

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