War, pandemic, and inflation deal Fed a complex trifecta

WASHINGTON (March 14) - In what now seem the simpler days of December, when there was only a pandemic to worry about, Federal Reserve officials rallied around the view they could tame inflation with modest interest rate hikes while the economy and labor market thrived.

A war in Europe has now been layered on top of the health crisis, and when U.S. central bank policymakers meet this week they will have to decide just how much damage has been done to that rosy outlook, and whether their hopes for an economic "soft landing" have been diminished or dashed altogether.

The Fed is almost certain to raise its benchmark overnight interest rate by a quarter of a percentage point at the end of its two-day policy meeting on Wednesday. More important will be projections showing just how far policymakers think rates will need to rise this year and in 2023 and 2024 to tame inflation that has blasted past their expectations.

reuters