Lindsay and Ann Saphir (NYSE:) Dunsmuir

(Reuters) – The last time Jerome Powell, Federal Reserve Chair, oversaw a rate hike cycle, the watchword was “gradual.”

It will be different this time.

“We are going to need to be, as I’ve mentioned, nimble about this. After the Fed’s January policy meeting in which Powell indicated that the Fed would be initiating its first COVID-19-era rate rises, Powell spoke on Wednesday. From there, the future is open to interpretation.

Aneta Marcowska and Thomas Simons, Jefferies economists, wrote: “FOMC Signs A Guidance Light Tightening Cycle”

Powell stated that inflation has risen significantly and the economy is much more robust than it was when Powell announced the Fed’s last rate hikes.

Then, from December 2015 to 2018, the Fed never left less than three months between rate hikes, and never raised the target rate more than a quarter-of-a-percentage-point at a time.

Powell, along with other Fed policymakers, promised during this period that it would follow a gradual policy path. Two years after the Fed raised rates, the Fed started to shrink its balance sheets to tighten its policy. It promised that it would do this at the same pace as paint dries.

Inflation is at an all-time high of 40 years and unemployment is just 3.9% away from the Fed’s target of full employment.

Powell said Powell used “nimble” three times as he described the process of working through it, meeting after meeting.

Powell did not specify exactly how these differences would look. In fact, Powell asked directly whether the Fed was likely to increase rates at greater intervals, or if it was departing from its “gradual” script. Powell replied that policymakers had yet not addressed those questions.

“We’ll address these issues as we go into March and the meetings following that,” he stated. We fully understand that this is an unusual situation.

Powell stated that although Fed policymakers indicated in December they would raise rates 3 times this year for inflation, the picture has deteriorated since then.

On the possibility of more than four rate hikes this year, “he didn’t say they wouldn’t,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, “which indicates a flexibility to raise rates much more quickly (if necessary) than anyone was expecting.”

Others were more succinct, “Today the Fed interest rate rocket left the hangar,” said Beth Ann Bovino, U.S. chief economist at S&P Global (NYSE:) Ratings.

Michael Feroli, the chief U.S. economic advisor at JPMorgan (NYSE): wrote “No more Mr Nice Guys.”

Futures rates markets are now fully in a more rapid trajectory. The pricing is better than any odds of 5 hikes each year of 25%.

Powell repeated the fact that Fed was primarily responsible for bringing inflation down to 2%. As would improving, even if not fully resolved, supply chains, and the absence of fiscal stimulus, would be helpful.

Powell, however, did not dismiss concerns about the Fed becoming aggressive in its efforts to reduce inflation.

We need another lengthy expansion. That will require price stability. Powell stated that this will require Powell to tell the Fed to increase interest rates and to do its part to bring inflation down to 2%.