WASHINGTON (AP) — If measures of the U.S. economy keep coming in hot, as they did in January, the Federal Reserve will likely have to raise interest rates even higher than it has already signaled — and keep them there longer — Chair Jerome Powell will likely warn in testimony to Congress on Tuesday.

Powell’s first appearance before Congress in nine months coincides with recent signs that the economy remains resilient and inflation still stubbornly high. In the past year, the Fed has raised its benchmark interest rate at the fastest pace in four decades, to about 4.6%, its highest level in 15 years. But consumer spending, hiring and growth have yet to cool.

Several Fed officials said last week that they would favor raising the Fed’s key rate above the 5.1% level they had projected in December if growth and inflation stay elevated. When the Fed raises its key rate, it typically makes mortgages, auto loans, credit card rates and business lending more expensive. It’s a trend that can slow spending and inflation but also risks sending the economy into a recession.

In his two days of semi-annual testimony to Congress — Powell will address the House Financial Services Committee on Wednesday — the Fed chair will have to navigate a treacherous path: He will likely be pressed by Democrats concerned that ever-higher borrowing rates will tip the economy into recession and Republicans who have urged the Fed to act aggressively to slow price acceleration.

Inflation, as measured year over year, has slowed from its peak in June of 9.1% to 6.4%. But its progress stalled in January: The Fed’s preferred measure of price increases rose from December to January by the most in seven months.

Powell has noted that so far, most of the slowdown in inflation reflects an unraveling of supply chains that have allowed more furniture, clothes, semiconductors and other physical goods to reach U.S. shores. By contrast, inflation pressures remain entrenched in numerous areas of the economy’s vast service sector.

Rental and housing costs, for example, remain a significant driver of inflation. At the same time, the cost of a new apartment lease is growing much more slowly, a trend that should reduce housing inflation by mid-year, Powell has said.

But the prices of many services — from dining out to hotel rooms to haircuts — are still rising rapidly, with little sign that the Fed’s rate hikes are having an effect. Fed officials say the costs of those services mainly reflect rising wages and salaries, which companies often pass on to their customers in the form of higher prices.

As a result, the Fed’s monetary policy report to Congress, which it publishes in conjunction with the chair’s testimony, said that quelling inflation will likely require “softer labor market conditions” — a euphemism for fewer job openings and more layoffs.

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WASHINGTON (AP) — Federal Reserve Chair Jerome Powell tested positive Wednesday for COVID-19 and is experiencing “mild symptoms,” the Federal Reserve announced.

Powell, 69, is “up to date” with all COVID vaccines and boosters, the Fed said, and is working from home.

“Following Centers for Disease Control and Prevention guidance, he is working remotely while isolating at home,” the central bank said in a statement.

The Fed’s next interest rate-setting meeting is Jan. 31-Feb. 1, a timetable that could allow Powell to recover in time to participate in person. If not, an alternative plan would be to return to a virtual meeting, which the Fed held for months during the height of the pandemic.

The Fed is in the midst of an aggressive drive to tame high inflation, though there are growing signs that price pressures are gradually easing. The central bank is expected to raise its benchmark interest rate by a slower quarter-point at the next meeting, after a half-point increase in December and four consecutive three-quarter-point hikes before that.

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NEW YORK (AP) — The Dow Jones Industrial Average surged more than 900 points and the S&P 500 had its biggest gain in two years Wednesday after Federal Reserve Chair Jerome Powell downplayed the likelihood of an even larger interest rate hike after announcing the sharpest rate increase since 2000.

The remarks, which came after the Fed announced its decision to raise its key interest rate by double the usual amount, allayed concerns that the central bank was on its way to a massive increase of three-quarters of a percentage point at its next meeting in June.

The S&P 500 climbed 3%, its best day since May 2020. The benchmark index is now up 4.1% this week, which represents roughly half its monthly loss in April. The Dow jumped 2.8% and the Nasdaq climbed 3.2%. The indexes had all briefly been in the red earlier in the day.

Bond yields fell after the Fed’s announcement. The yield on the 2-year Treasury dropped to 2.64% from 2.78% late Tuesday, an unsually large move. The yield on the 10-year Treasury, which influences mortgage rates, fell to 2.93% from 2.96% It had initially jumped to 3.01% until Powell’s remarks during a press conference.

The comments came shortly after the Fed said it raised its benchmark short-term interest rate by a half-percentage point, it’s most aggressive move since 2000, and signaled further large rate hikes ahead. The increase raised the Fed’s key rate to a range of 0.75% to 1%, the highest point since the pandemic struck two years ago.

The Fed also announced details of how it will start reducing its huge holdings of Treasury debt and mortgage-backed securities, a tool the central bank has used to help keep long-term interest rates low.

The S&P 500 rose 124.69 points to 4,300.17. The Dow climbed 937.27 points to 34,061.06. The Nasdaq gained 401.10 points to 12,964.86.

Smaller company stocks also posted solid gains. The Russell 2000 rose 51.07 points, or 2.7%, to 1,949.92.

The latest move by the Fed had been widely expected, with markets steadying this week ahead of the policy update, but Wall Street was concerned the Fed might elect to raise rates by three-quarters of a percentage point in the months ahead.

Powell eased those concerns, saying the central bank is “not actively considering” such an increase.

The VIX, an index that measures how worried investors are about upcoming drops for the S&P 500, fell about 11%, one of its biggest drops this year, after Powell’s remarks.

Earlier, Powell also said the economy can make it through rate increases without falling into a recession.

“The economy is strong and well positioned to handle tighter monetary policy,” he said, though he cautioned “it’s not going to be easy.”

Investors are worrying about whether the Fed can pull off the delicate dance to slow the economy enough to halt high inflation but not so much as to cause a downturn. Still, the market cheered the Fed’s latest moves.

“It’s certainly heady days when the market doesn’t blink at the most aggressive rate hike in 22 years, but keep in mind this was extremely well-telegraphed and priced in,” said Mike Loewengart, managing director, investment strategy at E-TRADE from Morgan Stanley.

The central bank also announced that it will start reducing its huge $9 trillion balance sheet, which consists mainly of Treasury and mortgage bonds, starting June 1.

The market’s gains were widespread Wednesday. Roughly 85% of the stocks in the S&P 500 notched gains, with technology companies powering much of the advance. Apple rose 4.1%.

Energy stocks were among the biggest gainers following a 5.3% increase in the price of U.S. crude oil after Europe took a step closer to placing an embargo on Russian oil as that country continues its war against Ukraine. Any embargo could strain oil supplies and push prices still higher. Exxon Mobil rose 4%.

The Fed’s aggressive shift to raise interest rates comes as rising inflation puts more pressure on businesses and consumers. Higher costs for energy and other commodities have prompted many businesses to raise prices and issue cautious forecasts to their investors. Wall Street and economists are worried that higher prices on everything from food to gas and clothing will prompt a slowdown in consumer spending and crimp economic growth.

The worries have worsened with Russia’s invasion of Ukraine and its impact on energy and key food commodity prices. China’s increasingly stricter lockdown measures because of rising COVID-19 cases have also added concerns about slower economic growth because of supply problems and shipping backlogs.

Wall Street is closely watching economic data for any signs that inflation might be easing. Consumer prices surged in March, but a measure of inflation that excludes food and energy had its smallest monthly rise since September. That was a welcome sign for investors and more of the same in the coming months cold temper inflation concerns.

“If we can get just a few more readings showing inflation slowing, that could be the match that sparks some confidence,” said Ryan Detrick, chief market strategist for LPL Financial.

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WASHINGTON (AP) — Federal Reserve Chairman Jerome Powell says that the pace of improvement in the economy has moderated in recent months with future prospects remaining “extraordinarily uncertain.”

In remarks released by the Fed on Monday, Powell said that the increase in new COVID-19 cases both in the United States and abroad was “concerning and could prove challenging for the next few months. A full economic recovery is unlikely until people are confident that it is safe to reengage in a broad range of activities.”

Powell said while progress on developing vaccines had been “very positive,” significant challenges remained regarding the timing, production and distribution of the vaccines, and it remained difficult to assess the economic implications of this process with any degree of confidence.

Powell’s remarks were prepared for a joint appearance he will make on Tuesday with Treasury Secretary Steven Mnuchin before the Senate Banking Committee. The hearing is part of the panel’s oversight responsibilities required under the $2 trillion CARES Act legilsation Congress passed in March.

In Mnuchin’s prepared remarks, which were also released Monday, the Treasury secretary said the Trump administration was still willing to support targeted fiscal package to provide further economic relief.

“I strongly encourage Congress to use the $455 billion in unused funds from the CARES Act to pass an additional bill with bipartisan support,” Mnuchin said. “The administration is standing ready to support Congress in this effort to help American workers and small businesses that continue to struggle with the impact of COVID-19.”

Mnuchin announced on Nov. 19 that he would not grant extensions for five lending programs being operated jointly by the Fed and the Treasury Department that were scheduled to expire on Dec. 31. Mnuchin said that the money allocated to the Fed for those programs should be used now instead to provide support to Congress for additional assistance to individuals and businesses.

The five programs that Mnuchin announced he would not extend past this year included backstops for corporate and municipal debt and the purchase of loans for small businesses and nonprofits.

Earlier on Monday, the Fed and Treasury announced as expected that four other lending facilities that do not utilize CARES Act funds would be extended through next March. Those facilities helped to stabilize short-term funding markets when the coronavirus hit last spring, sending shockwaves through the financial system.

The four Fed loan programs that were extended included the Commercial Paper Funding Facility, which provided critical support for the market that supplies short-term corporate IOUs. Also extended was operation of the Money Market Fund Liquidity Facility, which helped to prevent potential runs on money-market mutual funds.

In his remarks, Powell said that the Fed’s “broad and forceful actions” had helped unlock almost $2 trillion in funding to support “businesses large and small, nonprofits and state and local governments since April.”

Following their appearance Tuesday before the Senate Banking Committee, Powell and Mnuchin were scheduled to testify Wednesday at an oversight hearing being held by the House Financial Services Committee.

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