The US Federal Reserve Chair, Jerome Powell, has suggested that the central bank may need to raise interest rates higher than expected in response to strong data, and could move in larger steps if the "totality" of incoming information suggests tougher measures are needed to control inflation.
This follows unexpected economic strength and an unusually large increase in payroll jobs reported in January.
Powell's remarks suggest that the Fed could be more aggressive and raise interest rates faster than anticipated.
As a result of Powell's comments on Tuesday, stocks fell and the dollar rose.
Powell's comments are the clearest acknowledgment yet that recent reports showing inflation remains stubborn and the job market remains resilient are likely to shake up the policy trajectory for America's central bank.
However, Powell stressed on Wednesday that there has not yet been a decision on how large an interest rate hike to impose at the Fed's next policy meeting in two weeks.
While some analysts had anticipated another 0.25 percentage point increase, Powell's latest comments suggest a higher rate increase is possible.
Investors and traders have drastically increased their bets of a 50-basis-point rate hike in March after Powell's comments, with money market futures pricing a more than 40% chance of such a move, from 23% before the remarks.
However, there are also concerns that the faster-than-expected tightening could cause significant hardship to households and businesses.
Powell's remarks underscore the importance of the incoming round of data on the labor market, inflation and consumer spending.
If it shows that economic activity is heating up, the Fed is prepared to return to a more rapid pace of rate increases and push rates higher than expected.