Since last year, Federal Reserve officials have been leading the charge to raise interest rates as they wrestle to keep pace with price increases that drive up the cost of living.
This is probably the toughest decision the Fed has to make in a long time, says Ryan Sweet, chief economist at Oxford Economics, who expects a 0.25 percentage point increase.
He says that Powell will have to play the two-handed economist perfectly convincing investors that the central bank can still raise rates to fight inflation on the one hand, while using other tools to combat stress in the financial system.
After he was appointed to the Fed by former President Donald Trump, Powell had a lot to do to restore credibility after he infamously described the price rises that started to hit America in 2021 as transitory. Bank failures have added to the scrutiny, putting into focus costs from the rapid rate rise campaign, and raising questions about whether the Federal ReserveFederal Reserve has been too lax in its oversight.
The Fed should have reacted to inflation six months earlier, and then raise rates more slowly. Venture capitalist David Sacks wrote on Twitter after bank failures that they slammed on the brakes.
Over the past year, the Fed has raised its key rate -- what it charges banks to borrow -- from near zero to more than 4.5% -- the highest level since 2007.