The market is forced to quickly adapt to the new Jerome Powell. The Fed chairman signaled on Tuesday that not only is an interest rate cut unlikely any time soon, but a larger rate hike is expected later this month. This development is different from what investors expected from the Fed just two months ago. As their perception of Powell changes, the upcoming economic data could create a bumpy transition. Speaking before a Senate committee on Tuesday and another on Wednesday in the House of Representatives, he hinted that the central bank is ready to raise interest rates, potentially aggressively, if the US economy continues to overheat. His comments dispelled any remaining hope that the Fed would soon loosen its approach to fighting inflation. All three major US stock indexes closed down more than 1 percent after Tuesday’s session as investors braced for even higher borrowing costs.

The futures market now expects the Fed to raise interest rates by 50 basis points in March, according to a CME Fed Watch survey, more than double the corresponding move in February. To be fair, however, the Fed already said in December that it expects another 50 basis points increase overall through 2023. However, investors mostly expected the central bank to raise borrowing costs a little less and start cutting it later in the year. . Friday’s employment data is expected to show a slowdown in February employment growth, according to economists polled by Reuters. Experts also note a decrease in inflation in February, which increased in the first month of the year. Both outcomes would benefit from an additional 25 basis points increase in core capital rather than half a percentage point. LinkedIn’s country employment measurement showed that 6.5% fewer people were hired in February than in January, the biggest drop since April 2020. Jerome Powell has repeatedly stressed that the Fed’s interest rate decisions will be heavily based on the latest economic data. His comments to Congress opened the door for a bigger boost and investors jumped right through him.