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Fed set to raise interest rates: Here’s how it could help with inflation

The Federal Reserve is expected to raise interest rates by a quarter of a percentage point when it begins its two-day meeting on Tuesday — the first of several hikes that the central bank is likely to undertake this year. Fed Chairman Jerome Powell’s mandate to tame record levels of inflation has been complicated in recent weeks by the Russian invasion of Ukraine and the subsequent Western sanctions imposed on Moscow. Powell and his Fed governors anticipated that supply chain disturbances would resolve in time, bringing the Consumer Price Index lower before the end of the year. But observers now say that high levels of inflation are here to stay well into 2023. Treasury Secretary Janet Yellen told CNBC last week that Americans ought to gird for “very uncomfortably high” inflation for at least the next year. Analysts now say the US economy is at greater risk of a recession due to the ongoing crisis in Eastern Europe. Global oil prices have hovered around triple digits in recent days, retreating somewhat after reaching $120 per barrel last week. Last week, the Department of Labor released data showing that inflation rose 7.9% in February — the fastest pace since 1982. On a monthly basis, the Consumer Price Index — a closely tracked inflation gauge that details the costs of goods and services — rose 0.8% from January to February. Inflation increased at a faster rate than economists expected. The Fed will look to bring inflation under control by tightening monetary policy after extending massive amounts of credit to keep the economy afloat during the coronavirus pandemic. But analysts are unsure whether the central bank will raise interest rates higher than it initially planned.

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