The Dow Jones Industrial Average gained 183.15 points, or 0.51%, while the S&P 500 rose 0.92% and the Nasdaq Composite closed the day up 1.41%.
Testifying before the Senate as part of his re-confirmation process, Powell said a normalized supply chain could help allay concerns about inflation in 2022 but assured the Fed would implement rate hikes beyond current expectations if inflation remains high.
“If we have to raise interest rates more over time, we will. We will use our tools to get inflation back,” he said.
He added that if rapid price gains start to become “entrenched in our economy,” the central bank may have to take stark action to cap off inflation and avoid a recession.
“If inflation does become too persistent if these high levels of inflation get entrenched in our economy, and in people’s thinking, then inevitably that will lead to much tighter monetary policy from us, and it could lead to a recession, and that would be bad for workers,” Powell said.
Powell also addressed the Fed’s other goal of achieving full employment, stating that “high inflation is a severe threat to the achievement of maximum employment.”
Stocks and bonds both saw increases during Powell’s testimony as he didn’t announce a plan to accelerate a change from the central bank’s current monetary policy.
“Powell noted that the balance sheet runoff will occur later in 2022 and that ‘it’s a long road back to normal.’ On net, the Chair’s comments are consistent with a willingness to deliver the liftoff hike in March assuming there isn’t a dramatic reversal in the pace of consumer price gains,” Ian Lyngen of BMO said in a note to clients.
Major tech stocks helped to lead Tuesday’s gains as Amazon rose 2.4%, Apple increased 1.68% and Nvidia climbed 1.52%.
Shares of Exxon Mobil also gained 4.21% on Tuesday as U.S. oil prices hit $80 per barrel.