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Fed gears up to attack inflation as US recession fears grow

WASHINGTON (AFP) – The Federal Reserve this week is set to redouble its assault against record United States (US) 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 signalled 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 80’s – 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.

The United States Federal Reserve building in Washington. PHOTO: AFP