Fed gears up to attack inflation as US recession fears grow

The Federal Reserve this week is set to redouble its assault against record U.S. inflation while facing an array of shocks both internal and external that analysts fear may one day put the world's largest economy into a recession.

The policy setting Federal Open Market Committee (FOMC) will convene its two-day meeting tomorrow, and top officials have strongly signaled they will hike interest rates by half a percentage point and announce plans to reduce their massive holdings of debt.
Both moves would further tighten lending conditions in the world's largest economy and potentially take the steam out of consumer prices that are rising at rates not seen since the 1980s, driven in part by the Fed's own policies.
The rate hike is expected to be one of several the Fed makes this year, but with the economy also facing shocks from Russia's invasion of Ukraine and COVID lockdowns in China, analysts warn the central bank must strike a delicate balance to stop a downturn.

"They're going to have to be very, very nimble to keep the economy from going into a ditch," Jay Bryson, managing director and chief economist at Wells Fargo's Corporate and Investment Bank, said in an interview.
Top Fed officials including Chair Jerome Powell have hinted strongly that a half-percentage point hike will be agreed to at the May 3-4 meeting, twice the amount of the quarter-point hike the FOMC implemented in March.
The central bank is also expected to announce plans to begin offloading the trillions of dollars in Treasury bonds and mortgage-backed securities it bought during the pandemic to support the economy, which would raise borrowing costs.
"They told us everything in advance," said Roberto Perli, head of global policy at Piper Sandler. "I'd be shocked if...