The Fed will overcome the turmoil that has engulfed global financial markets in recent days, laying the groundwork for a rate hike in March in response to Inflation is rampant.

The Federal Open Market Committee is expected to keep its main policy rate at its lowest level in nearly two years on Wednesday, while signaling it is ready to start raising rates more materially in an attempt to cool the U.S. economy.

The Fed’s statement will be released Wednesday at 2 p.m. ET, followed shortly by a news conference with Fed Chairman Jay Powell.

The decision was made over a period of time extreme volatility for financial markets. U.S. stocks have been rocked in recent days as investors face a more hawkish central bank.

In the weeks leading up to the January meeting, Fed officials have transmit signal They backed “lift off” in March, citing potential strength In the US labor market and inflation running at the fastest pace in about 40 years.

The asset-purchase program, which aims to strengthen the economy’s defenses against the Covid-19 shock and avoid a worse financial catastrophe, is also due to end in March.

With the unemployment rate now below 4%, many policymakers have concluded that full employment has been achieved, achieving one of the two goals the Fed set before it said it would tighten monetary policy more significantly. The other — inflation averaging 2 percent over time — was met last year.

Expectations for the total number of rate hikes this year have also changed since then, with many Fed officials and Wall Street economists suggesting radical path Might be more guaranteed than expected.

Some traders even speculated that the Fed might raise rates by half a percentage point in March, but such a drastic move seems unlikely.

Just last month, the FOMC and other regional chapter chairs write in pencil Add 3 quarters in 2022, 3 in 2023, and 2 in 2024. At the time, they forecasted that core inflation would slow to 2.7% by the end of the year from the current 4.7%, while the unemployment rate fell to 3.5%.

However, the pace of the Fed scaling back its support and bringing its main policy rate closer to 2.5% could accelerate if inflation does not ease.

Economists said that could translate into rate hikes at each of its seven meetings after January, as the Fed seeks bolder measures to dampen red-hot demand.

How the Fed will shrink Its balance sheet stands at about $9 trillion after its first substantive discussions last month.

No decision has been made on the pace or when the cuts will begin, but officials appear to agree that the process should be faster than the cuts in 2017, when the balance sheet hovered around 3.7 tonnes.

This process of “runoff,” or not reinvesting the proceeds of maturing U.S. Treasury securities and agency mortgage-backed securities, begins roughly two years after the first rate hike after the 2007 global financial crisis.

The events of 2017 ended with severe financial market stress – soaring short-term borrowing costs as it became clear that too much cash had flowed out of the financial system.

Economists widely expect the round to start in July, with some suggesting an earlier start.