The objective: to push commercial banks to offer their customers higher interest rates for loans, in order to slow down consumption, and therefore to ease the pressure on prices.

Especially since the supply problems are expected to last for months.

Inflation being at its highest since 1982, the powerful American Federal Reserve (Fed), which holds its monetary policy meeting on Tuesday and Wednesday, wants to launch the movement.

Fed Chairman Jerome Powell recently expressed confidence in the ability of the institution to ensure a "soft landing", that is to say "control inflation without causing a recession".

The exercise promises to be tricky, however, and the Fed will have to play tight.

“The combination of higher inflation and slower growth presents a dilemma for the Federal Reserve,” Wells Fargo bank economists said in a note.

They say it will prioritize slowing inflation, especially as the monetary institution “has gained credibility over the past decades as a guardian of price stability.”

They expect six increases of a quarter of a percentage point (0.25%) in 2022.

"Appropriate" to act

For Joe Biden's administration, the ball is now in the Fed's court, and Treasury Secretary Janet Yellen says it is "appropriate" for the central bank to act.

Joe Biden's finance minister told CNBC on Thursday that she too expects "a soft landing".

Rates have been in a 0-0.25% range since March 2020. The Fed usually raises them in 0.25 percentage point increments, but the assumption of a more abrupt 0.50 point hike had a time seemed plausible.

A gas station in Los Angeles (California) on February 17, 2022 Patrick T. FALLON AFP

Jerome Powell, however, was very clear during a hearing in Congress in early March: "I am inclined to propose and support a rate hike of 25 basis points".

On the markets, no one expects a rise of half a point anymore, almost all of the players (95.9%) are counting on only a quarter of a point, the others even anticipate that rates will remain at their current level, as assessed by CME Group's futures products.

In Europe, where inflation is lower, the Fed's counterpart, the ECB, decided on Thursday to maintain its rates at their historic lows at this stage.

1970s ghost

Inflation in the United States rose to 7.9% year on year in February, according to the Commerce Department's CPI index, and the war in Ukraine caused a further spike in gasoline and fuel prices. food.

The Fed favors another indicator, the PCE index: +6.1% over one year in January.

This raises the specter of double-digit inflation of the 1970s and early 1980s. , but had plunged the country into recession.

“The 1970s, when Fed policymakers had to organize a painful recession, (…) are engraved in the institutional memory of the Fed”, further underline the economists of Wells Fargo.

Economist Diane Swonk of Grant Thornton said she was "worried about rising inflation expectations and the triggering of a more vicious wage-price spiral".

A labor shortage is already driving up wages.

The Fed building in Washington on October 22, 2021 Daniel SLIM AFP

"But (we're) not there yet and the Fed, along with other central banks, are committed to avoiding a repeat of the 1970s," she said in a tweet, pointing out that "it's is possible, although it may be accompanied by an increase in unemployment".

The US job market is now solid, the unemployment rate fell in February to 3.8%.

The Fed is also expected to discuss when to begin reducing its balance sheet, that is, gradually parting with the billions of dollars of Treasuries and other assets it has purchased since March 2020, to support the functioning of the economy.

© 2022 AFP