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WASHINGTON: The Federal Reserve has its inflation-fighting weapons ready to fire, and when the US central bank’s policy committee convenes this coming week, the focus will not be on whether they will pull the trigger but rather how many times.

With the Omicron variant of Covid-19 adding to economic uncertainty and fueling a spike in consumer prices rose not seen for decades, the Fed’s decision Wednesday will be closely scrutinized for signs policymakers will take more aggressive steps to contain inflation.

The policy-setting Federal Open Market Committee (FOMC), which opens its two-day meeting on Tuesday, is widely expected to begin hiking interest rates in March, though a few economists note the possibility of early action.

“I think it’s kind of a holding operation rather than a blockbuster meeting, but the March one will be more fun,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, told AFP.

Fed sees three interest rate hikes in 2022

Only months ago, Fed Chair Jerome Powell and other top officials were arguing that the sharp rise in inflation would be “transitory,” but that stance grew increasingly shaky with each new data report showing prices rising and spreading to many goods, beyond cars and energy. By the end of 2021, policymakers conceded they had miscalculated and pivoted, announcing they were ready to attack inflation head on.

They started by tapering the bond buying program implemented to stimulate the economy, and accelerated the pace of the wind down at their last meeting in December. In recent weeks, Fed officials have given strong signals that once the tapering concludes in March, they will hike the benchmark lending rate for the first time since they slashed it to zero in March 2020 at the start of the Covid-19 pandemic.

“The move towards a March rate increase is pretty clear — and I expect Powell in his press conference (Wednesday) to reinforce that perception,” said David Wessel, a senior fellow in economic studies at the Brookings Institution. Hiking could help contain consumer prices that spiked seven percent in 2021, with costs for gasoline, food, housing and used cars shooting up.

But the question remains as to how many times the Fed will increase rates.

The causes of the inflation are myriad, from global issues such as the semiconductor shortage to more domestic concerns like a scarcity of workers and the massive government outlays during the pandemic that have fattened Americans’ wallets and boosted demand. “If there’s any mention of the persistence of inflation, that would also be an indication that the Fed is not just ready for lift off but that they want to fly high,” Beth Ann Bovino, US chief economist at S&P Global Ratings, said in an interview.

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