The Federal Reserve is set to raise interest rates for the first time since 2018, but faces a dilemma over how aggressively to tighten monetary policy as war in Ukraine threatens to dent growth and worsen the highest inflation in 40 years.
At this week’s meeting of the Federal Open Market Committee, US central bankers are all but guaranteed to raise the federal funds rate by a quarter of a percentage point — their most forceful step to date to shift monetary policy away from the ultra-loose settings put in place at the onset of the pandemic.
The move comes despite a sharp escalation in geopolitical tensions following Russia’s invasion of Ukraine, which has attracted some of the most punitive financial sanctions ever from the US and its allies.