The Federal Reserve (Fed) may need to raise interest rates more than expected in response to recent strong data and is prepared to move in larger steps if the “totality” of incoming information suggests tougher measures are needed to control inflation, Fed Chair Jerome Powell told US lawmakers on Tuesday.

“The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated,” Powell said in prepared remarks for a hearing before the Senate Banking Committee.

The remarks were his first since inflation unexpectedly jumped in January and the US government reported an unusually large increase in payroll jobs for that month.

While some of that unexpected economic strength may have been due to warm weather and other seasonal effects, Powell said the Fed was cognizant it may also be a sign the US central bank needs to do more to temper inflation, perhaps even returning to larger rate increases than the quarter-percentage-point steps officials had been planning to stick with.

“If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes,” Powell said.

The Fed will hold its next policy meeting on March 21-22, with the release this Friday of the government’s monthly jobs report and an inflation report next week now critical in policymakers’ judgment about whether they are again slipping behind the inflation curve, or can stick with the more tempered policy planned at their last meeting.

But in either case Powell’s comments mark a stark acknowledgement that a “disinflationary process” he spoke of repeatedly in a Feb. 1 news conference may not be so smooth.

Although inflation “has been moderating,” since its peak last year, Powell said, “the process of getting inflation back down to 2 per cent has a long way to go and is likely to be bumpy.”

Members of the Senate Banking Committee will question Powell after he delivers his testimony, with a similar hearing scheduled before the House of Representatives Financial Services Committee on Wednesday.

Powell’s testimony marked his first public remarks on an issue now at the centre of Fed discussion as officials weigh whether recent data will prove to be a “blip,” as one of his colleagues suggested, or be seen as evidence the central bank needs to lean on the economy even harder than currently expected.

In his testimony, Powell noted that much of the impact of the central bank’s monetary policy may still be in the pipeline, with the labour market still sustaining a 3.4per cent unemployment rate not seen since 1969, and strong wage gains.

In a comment that may well be seized on by some Senate Democrats, Powell suggested that the labour market might have to weaken for inflation to fall across the broad services sector, a labour-intensive part of the economy where prices continue to rise.

“To restore price stability, we will need to see lower inflation in this sector, and there will very likely be some softening in labour market conditions,” Powell said.