The Federal Reserve is poised to unleash another massive rate hike this week after the latest data showed a worrying US inflation picture that confirmed the need for the central bank to remain aggressive.

Soaring prices have pushed annual inflation to a 40-year high, causing pain to American consumers and businesses, despite the welcome drop in gas prices at the pump in recent weeks.

The disappointing August CPI report released last week showed that the cost of housing, food and medical services continued to rise. And when volatile food and energy prices are factored out, so-called core inflation accelerates.

Families are grappling with soaring prices initially sparked by high demand as the world’s largest economy emerged from the pandemic amid supply chain snarls. The situation has been exacerbated by Covid lockdowns in China and rising energy and food prices due to the Russian war in Ukraine.

It’s not just the current high level of inflation that worries policymakers, but fear that consumers and businesses are beginning to expect rising prices is becoming an enduring feature that could trigger a dangerous spiral and phenomenon called stagflation.

This fear has prompted the Fed to frontload its rate hikes rather than follow the more usual trajectory of small, incremental steps over a longer period of time.

The US Federal Reserve has hiked the benchmark interest rate four times this year, including two consecutive three-quarter-point hikes in June and July.

The aim is to raise borrowing costs and cool demand – and it’s having an effect: For the first time since 2008, home mortgage rates have exceeded six percent.

A third massive hike is expected on Wednesday following the conclusion of the Fed’s two-day monetary policy meeting. And some people raise the possibility that the Federal Reserve could make an even bigger move.

However, concerns are growing that the aggressive action could plunge the US economy into a recession that would resonate around the world.

“The blistering August core inflation figures released this week have increased pressure on the Federal Reserve to hike rates by a full percentage point at the upcoming meeting instead of 0.75%,” said Diane Swonk, chief economist at KPMG US said in an analysis.

“This will be one of the toughest and most politically sensitive decisions. It marks the Federal Reserve’s first step towards an actual recession.”

Fed Chair Jerome Powell has made it clear that a recession is a risk he is willing to take. In fact, it’s a risk the central bank must take to avoid an even worse outcome: a repeat of the damaging, runaway inflation of the 1970s and early 1980s.

“We must act bluntly now, as strongly as we have, and we must hold on until the job is done,” Powell said in his final public statements before the policy meeting.

Powell’s predecessor in the final era of hyperinflation, Paul Volcker, was forced to take extreme measures after rising prices solidified, bounced back, and surpassed the mid-1970s peak after repeated failed attempts to stem them.

This led to a deep recession and unemployment of over 10 percent.

The Fed’s goal is to avoid the “very high social costs” of the Volcker era and maintain public confidence in the central bank’s commitment to fighting inflation.

“The clock is ticking,” Powell warned.

While the latest data showed US annual inflation slowed slightly to 8.3 percent in August – from a peak of 9.1 percent in June – prices actually edged up for the month on widespread price hikes.

Central bankers have the luxury of a strong labor market, low unemployment and a resilient US consumer, but many economists now see a recession as likely.

Former US Treasury Secretary Lawrence Summers is among those warning that unemployment must rise to bring inflation under control.

He also advocates more aggressive Fed action.

“If I had to choose between 100 basis points in September and 50 basis points, I would choose a 100 basis point move to add credibility,” Summers said in a recent tweet.