The Federal Reserve is expected to lift its benchmark interest rate for the first time since 2018 and set the stage for rate rises at most of the remaining seven policy meetings this year as it seeks to combat the highest inflation in four decades.

The US central bank is all but guaranteed to increase the federal funds rate by a quarter of a percentage point on Wednesday, bringing the target range to 0.25 to 0.50 per cent, in the latest milestone for the US economy in its recovery from the pandemic.

Fed officials are also set to sharply revise higher their projections for interest rates this year compared to three months’ prior, when they had forecast three quarter-point rate rises in 2022, followed by five more through 2024.

Policymakers on Wednesday are expected to signal their support for at least four more interest rate increases in 2022, in addition to the March move. Another three or four increases are set to be pencilled in for 2023, bringing the fed funds rate closer to a more “neutral” setting that neither boosts nor constraints growth.

The so-called “dot plot” of individual interest rate projections is also set to show several Fed officials expecting rates to eventually rise above a neutral level. Fed chair Jay Powell recently estimated the neutral rate to be between 2 and 2.5 per cent.

Underscoring the enormity of the shift in just a matter of months, officials were evenly split on the need for an interest rate increase as recently as last September.

The Fed’s statement and its latest economic projections will be published at 2pm Eastern Time, followed by a press conference with Powell shortly after.

The Fed’s embrace of a much more aggressive policy stance comes despite a sharp escalation in geopolitical tensions stemming from Russia’s invasion of Ukraine, which is broadly expected to dent growth and intensify price pressures. The European Central Bank also turned hawkish This month, scaling back its bond-buying plan as the war boosted inflation expectations.

While the US central bank has in the past delayed making major policy decisions in periods of acute conflict to avoid exacerbating volatility at a turbulent time, surging inflation and an extremely strong labour market are likely to prompt the Fed to press ahead with plans to more substantively tighten monetary policy.

Fed officials are also expected to significantly revise higher their forecasts for inflation, which is derived from the personal consumption expenditures price index. The median estimate for core inflation, which strips out volatile items such as food and energy, is set to rise above 3 per cent by the end of the year, up from 2.7 per cent last December. Next year’s estimates are also likely to increase. The core PCE index is at 5.2 per cent.

Forecasts for US economic growth are also set to moderate from the 5.5 per cent pace projected in December, while the unemployment rate is forecast to hold steady at 3.5 per cent.

The Fed is also likely to shed light on its plans to reduce its enormous balance sheet, which more than doubled in size over the course of the pandemic to $9tn as the central bank hoovered up government bonds as part of its efforts to shore up the economy.

The process is expected to start as early as May, with the Fed scaling back its holdings of Treasuries at an initial pace of $60bn a month and its stock of agency mortgage-backed securities by $40bn by ceasing to reinvest the proceeds of maturing securities . The pace is set to quicken over time.