US Fed set to raise interest rates for first time since 2018 amid soaring inflation

theguardian.com:

The Federal Reserve is expected to raise interest rates for the first time since 2018 as it struggles with soaring US inflation, the impact of the war in Ukraine, and the continuing coronavirus crisis.

The Fed has a dual mandate – to maximize employment and keep prices under control. The job market and the wider economy have made an impressive recovery from the lows of the pandemic, thanks in part to Fed rate cuts and a massive stimulus program, but prices have increased by 7.9% in the year through February – the highest rate of inflation in 40 years.

With inflation now rising around the world, the Fed is expected to announce it will follow other central banks, including the Bank of England, and raise rates by a quarter percentage point.

The Fed chair, Jerome Powell, will also hold a Wednesday press conference, where he will be asked about the central bank’s plans for future rises.

Supply chain issues have led to sharp increases in a variety of areas including used cars, food and utilities that are causing particular hardship for lower-income Americans.

The Fed initially dismissed rising prices and “transitory”, but has since acknowledged high inflation is likely to be around for some time. Supply problems that appeared to be normalizing earlier this year are also now feeling the impact of the war in Ukraine and face further setbacks as China imposes new lockdowns to curb new coronavirus outbreaks.

Raising rates too quickly threatens to push the US into recession. This week, CNBC’s Fed Survey – which gauges the opinions of fund managers, strategists and economists – put the probability of recession in the US at 33% in the next 12 months, up 10 percentage points from the 1 February survey. The latest survey put the of a chance