San Francisco Frontiers - Stocks fall, dollar climbs on Fed rate warning

Investors had been eagerly awaiting fresh signals about when the Fed might pause its rate-tightening cycle.

But Powell said in prepared remarks before two days of testimony in Congress that the central bank "would be prepared to increase the pace of rate hikes" following strong economic economic data.

The Fed and other central banks worldwide have been hiking rates in efforts to tame decades-high inflation, but the policy could also tip economies into recession.

"Nothing matters more to the stock market these days than the direction of interest rates," said Briefing.com analyst Patrick O'Hare.

The Fed raised rates by 25 basis point last month after a half-point increase in December that followed a series of three-quarter hikes.

"We will stay the course until the job is done," Powell said in the statement.

While analysts are betting on the United States and other major economies possibly avoiding recession despite inflation remaining elevated, there are concerns over China after the world's second-biggest economy set a lower-than-expected target for its growth this year.

Powell said that strong employment, consumer spending, manufacturing production and inflation figures in January indicated a partial reversal of earlier softening trends, which was likely due to "unseasonably warm weather in January".

Following Powell's testimony, attention will switch to US jobs data for February that is due Friday.

That comes after January's reading showed more than half a million new jobs were created, far more than expected.

Wall Street and European stock markets were down following Powell's comments.

The greenback surged against the British pound, euro and yen as higher rates make the US currency more attractive to investors.

Oil prices fell around two percent.

- Key figures around 1555 GMT -

New York - Dow: DOWN 0.7 percent at 33.183.58 points

London - FTSE 100: Down less than 0.1 percent at 7,925.07

Frankfurt - DAX: DOWN 0.6 percent at 15,568.26

Paris - CAC 40: DOWN 0.4 at 7,345.83

EURO STOXX 50: DOWN 0.7 percent at 4,282.83

Tokyo - Nikkei 225: UP 0.3 percent at 28,309.16 (close)

Hong Kong - Hang Seng Index: DOWN 0.3 percent at 20,534.48 (close)

Shanghai - Composite: DOWN 1.1 percent at 3,285.10 (close)

Euro/dollar: DOWN at $1.0646 from $1.0684 on Monday

Pound/dollar: DOWN at $1.1869 from $1.2023

Euro/pound: UP at 88.89 pence from 88.84 pence

Dollar/yen: UP at 136.32 yen from 135.95 yen

West Texas Intermediate: DOWN 2.3 percent at $78.60 per barrel

Brent North Sea crude: DOWN 2.0 percent at $84.46 per barrel

C.Lewis--SFF