The meeting "started at 10 a.m. (2 p.m. GMT) as planned," a spokeswoman for the Federal Reserve (Fed) told AFP.

Inflation has been accelerating month after month for a year and in March reached a peak since December 1981: +8.5% over one year, according to the CPI index, aggravated by the war in Ukraine.

In March, the Fed had started to raise its rates, for the first time since 2018. But it had then initiated the movement cautiously, by proceeding to an increase of 0.25 percentage points to bring them into a range between 0, 25 and 0.50%.

It had also signaled its desire to make six other increases this year, or as many as meetings by the end of 2022.

With price pressure unabated, Fed Chairman Jerome Powell has since acknowledged that it is "absolutely essential" to restore price stability and raise rates "rapidly".

The American Central Bank has two main missions: to ensure price stability and full employment.

On the employment front, the unemployment rate fell to 3.6% in March, close to its pre-pandemic level (3.5%).

Data for the month of April will be released on Friday.

But companies, faced with labor shortages and massive resignations, have had to raise salaries to attract candidates and retain employees, which has the effect of fueling inflation.

The prospect of a rate hike by the Fed caused a stir in the markets on Monday.

US 10-year bond yields briefly touched the 3% threshold at midday for the first time since late 2018.

In addition to interest rates, the Central Bank should mark the start of the reduction of its balance sheet, another major step in normalization.

Risk of a recession

Investors are especially anticipating Jerome Powell's press conference on Wednesday, on the lookout for comments on how interest rates could rise beyond that meeting.

So far, the Fed has clearly telegraphed its plans, announcing upfront its willingness to aggressively tighten from the May meeting, which has helped limit market volatility.

A majority of economists now expect another, even more aggressive three-quarters of a percentage point hike at the June meeting, which would be the first since 1994.

The Fed is also likely to start trimming its $9 trillion asset portfolio from June, at a much faster pace than in a previous reduction in its holdings five years ago.

The challenge is to moderate inflation without tipping the world's largest economy into recession.

Concerns about this have increased in recent weeks as growth wanes.

Gross domestic product even contracted by 1.4% in the first quarter, on an annual basis.

The experts want to be reassuring, noting that consumption, the historic engine of growth in the United States, is holding up.

But in a context of war in Ukraine, a slowdown in the Chinese and European economy, a recession no longer seems a distant risk.

Fed leaders currently estimate that they will be able to bring inflation back to their 2% target without raising rates above 3% to avoid stalling demand.

This, they say, is a "neutral" range designed to neither stimulate nor slow economic growth.

© 2022 AFP