(Reuters) – Jerome Powell, Fed chair, said Tuesday that the Federal Reserve would “keep pressing” in tightening U.S. monetary policy to ensure inflation remains low.

Powell spoke at a Wall Street Journal conference, “What is needed to see” was inflation dropping in a convincing and clear way. Powell added that they will continue to push until this happens. We will need to move more aggressively to tighten financial markets if that is not possible. If necessary, the Fed will move to a non-neutral policy.

COMMENT:

IAN LYNGEN, HEAD OF U.S. RATES STRATEGY, BMO CAPITAL MARKETS, NEW YORK

“One of the biggest takeaways from our perspective, and this is why we’re seeing the front-end of the (Treasury) market sell off, is he observed that neutral rates do not represent a stopping or looking around point. So, we’ve always known that neutral is very difficult to estimate, and so the idea that the Fed was going hike a while and then pause and look around was out there, and it was on the table, but he just told us that isn’t going to occur. Now this is very consistent with what we’ve seen in the past, which is once the Fed starts hiking, they continue to hike until something breaks. What is the best way to look at the potential equity market break? Is it credit? Is it housing? I think that’s going to be this cycle’s big unknown. It’s clearly not the equity market given the price action so far year-to-date and Powell effectively said we’re going to continue hiking until inflation eases.”

“I think it was confirmation that they’re going 50 and 50 in June and July … and the big question is whether they will go 50 in September, that is the unknown.”