The Federal Reserve may raise rates if challenges permit

Wednesday’s Federal Reserve will likely raise interest rates by a quarter of a point. This is a significant step towards reversing its extraordinary easing policy, which was put in place in order to support the economy during the pandemic.

Russia’s invasion in Ukraine has made already high inflation worse and created greater risks for growth. The pandemic is not only under control in the United States, but China is experiencing lockdowns that could lead to more disruptions in the supply chain and slow growth.

The Fed is raising rates in a period of financial market turmoil. Stocks have been sliding due to concerns about rising interest rates and uncertainty surrounding Ukraine. Oil prices have been on a wild ride. They soared to $130 per barrel last week, before plummeting to $97 per barrel Tuesday for West Texas Intermediate crude oil futures.

Fed watchers anticipate that the central bank will provide a quarterly forecast, which could include five to six additional quarter-point increases this year and three to four more in 2023. It may sound hawkish because it will stress that it plans to continue raising rates to combat high inflation.

These days, policymakers face unique challenges that they didn’t see months ago. According to economists, there are growing risks to economic growth and the Fed might not be able raise rates as often as it would like.

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