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    Why Is the Fed Raising Interest Rates?

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    Prices for groceries, couches and rent are all climbing rapidly, and Federal Reserve officials have been warily eyeing that trend. On Wednesday, they are expected to take their biggest step yet toward counteracting it.Central bank officials — who have been signaling for months that they are preparing to pull back economic support — are expected to raise their policy interest rate by a quarter percentage point. That small change will carry with it a major signal. Policymakers are telling markets and the public that they have fully pivoted to inflation-fighting mode and will do what is necessary to make sure price gains do not remain hot for months and years to come.The Fed will release its decision at 2 p.m., and Jerome H. Powell, the central bank’s chair, will hold a news conference at 2:30 p.m.The Fed is acting at a tense moment for many consumers, when people are worrying about rising day-to-day expenses and trying to think through what higher interest rates could mean for their finances. Here’s a rundown of what is happening, why it is happening and what it is likely to mean for markets and the economy.The Fed is taking its foot off the accelerator. More

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    As Fed Prepares to Raise Rates, Global Economy Sinks Deeper Into Turmoil 

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    Federal Reserve officials are set to raise interest rates to control inflation, but the return to normal they had hoped to see remains painfully elusive.WASHINGTON — When Federal Reserve officials raise interest rates on Wednesday, they will do so amid an unfortunate economic reality: Many of the inflationary pressures they had long assumed would dissipate have instead lingered, and some are getting worse.Central bankers have consistently underestimated how high inflation would rise, and how long it would last, as the economy has surged back from pandemic shutdowns. They will release a fresh set of quarterly economic projections Wednesday, in which they are likely to raise their inflation forecasts for the fifth time in a row.Like many private sector forecasters, the Fed misjudged how strong American demand would be for goods and how long that demand would help to keep global supply chains running behind schedule, forces that have combined to push up consumer prices.Officials spent much of the past year expecting a relatively quick return to some pandemic-infused version of normality, but backlogged factories, crowded ports and overburdened trucking companies are still failing to catch up. Repeated waves of the virus have exacerbated the problems, which along with rising wages and services prices have sent inflation higher. Consumer price gains hit a new 40-year high in February, pushed up by rising prices for food, rent and gas.Now, as Fed officials prepare to begin a series of interest rate increases to try to bring inflation under control, they again appear to be aiming at a moving target. Supply chains that showed signs of improvement in January and February are being thrown further into disarray by the Russian invasion of Ukraine and sweeping lockdowns in China, developments that promise to lengthen delivery times and add to prices.The war, at the nexus of Europe and Asia, has scrambled flights and ocean shipments; threatened supplies of palladium, nickel and wheat; and sent energy prices soaring, further fueling inflation. Automakers have shuttered factories because of a shortage of parts, and Russia has answered back to sweeping sanctions imposed by the West by announcing its own plans for export controls.In recent days, Chinese cities and provinces have imposed extensive lockdowns to try to stop the spread of the Omicron variant. Shenzhen, a hub of electronics manufacturing and a vital port that is home to 17 million people, announced a lockdown on Sunday night for seven days. Foxconn, a Taiwanese electronics firm that supplies Apple from factories there, said it would suspend operations. Further restrictions in China, home to more than a quarter of global manufacturing, are likely to reverberate through already-tangled supply chains and exacerbate inflation.“The question is whether this is going to be bad or very bad,” Phil Levy, chief economist at the logistics company FlexPort, said of the Chinese shutdowns in particular. He noted that this disruption came when shipping delays were already extreme.“If things get gummed up there, it will reverberate through the whole system,” he said, adding that it matters how long and how sweeping the shutdown proves. “These problems just build.”Mary Lovely, a senior fellow at the Peterson Institute for International Economics, said it was “hard to overstate” the importance of Shenzhen and its surrounding area for electronics, as well as for other industries, like metals, furniture and paper products.“I think it’s definitely going to have effect on supply chains,” she said. She added that she expected those pressures to translate more readily into increased prices than they did earlier in the pandemic.“Now we’re in a period with higher inflation, I think that suppliers may find it easier to pass those costs along, or take this opportunity to raise prices,” Ms. Lovely said.Fed officials have held interest rates near zero since March 2020 and are expected to raise them for the first time since 2018 on Wednesday. By making money more expensive to borrow and spend, the Fed is hoping to cool down demand and beat back inflation — helping conditions to even out when a return to “normal” has been painfully, and consistently, elusive.Quarantine workers in Shanghai on Monday. Further restrictions in China, home to more than a quarter of global manufacturing, are likely to exacerbate inflation and tangled supply chains.Qilai Shen for The New York TimesFed policymakers and Wall Street researchers alike thought that prices would fade as consumers began shifting their spending from imported goods back to movies, vacations and restaurants. That shift would help factories and shipping routes catch up with surging demand, as used car prices — which spiked last year — moderated. Those trends either haven’t happened, or they have been canceled out by increases in the prices of other products and services.Jason Furman, an economist at Harvard University, said many forecasters had been doing what investors sometimes refer to as “pricing to perfection”: assuming that everything is going to go well, even if that is not the most likely outcome.“You can look at the individual items: There’s been a lot of: What if inflation in X, Y, Z goes down?” he said. “And not: What if inflation in A, B, C goes up?”Many of the factors prompting economists to mark up their inflation forecasts now are not even tied to supply chains.Matthew Luzzetti, chief U.S. economist at Deutsche Bank, recently revised up his inflation projections because rent costs are rising so rapidly in the Consumer Price Index. Between that and wage growth, he thinks, high inflation will last unless the Fed intervenes.“For a while, inflation forecasters had been anticipating that the goods side of things would return to more normal dynamics” just as service prices, like rent, began to increase, he said. Services prices have indeed picked up, but normalization in good prices keeps getting “pushed out.”Consumers continue to spend a bigger share of their budgets on goods instead of services — purchases like travel and manicures — compared with before the pandemic. That has meant global producers are still struggling to keep up with demand. Even potentially short-lived disruptions, like the ones taking place in China, can add to a snowball of delays and shortages.Data released this month showed that the U.S. trade deficit hit a record in January, the height of the Omicron wave, in part because of surging imports of cars and energy. The average time to ship a container from a Chinese factory to a U.S. warehouse had stretched to 82 days in February, according to Freightos, a logistics platform, up from 45 days two years before.In many ways, the events of the past few years have been so unusual that few if any forecasters correctly predicted all of them. And Fed officials have acknowledged that they misjudged inflation last year, partly because they expected supply chains to recover more quickly.They are now striking a more wary tone.Jerome H. Powell, the Fed chair, told Congress this month that the war in Ukraine was “not going to help at all with supply chains.”“We haven’t seen much relief on the supply side,” he noted, explaining that he and his colleagues had been waiting for the strains to ease.Mr. Powell predicted that as the Fed raised interest rates this year, it would help cool off demand for car loans and mortgages, weakening spending in the economy and giving companies some room to catch up with demand. Central bankers are hoping that at the same time, the economy is “going back to normal” in terms of supply chains and the breakdown between goods and services, he said.Even so, he acknowledged that the Fed stood ready to act more aggressively if that didn’t happen.“We hope we’re getting help on the inflation front from a bunch of things,” Mr. Powell said. “In any case, we do have the responsibility to generate price stability, and we will use our tools to do that, over time.” More

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    Could Inflation Prompt Powell to Act Like Volcker?

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    The Federal Reserve is facing the fastest inflation most Americans have ever seen. Its chair says policymakers will do what it takes to tame prices.To Jerome H. Powell, the chair of the Federal Reserve, Paul Volcker is more than a predecessor. He is one of his professional heroes.“I knew Paul Volcker,” Mr. Powell said during congressional testimony this month. “I think he was one of the great public servants of the era — the greatest economic public servant of the era.”Now, if rapid inflation proves more stubborn than policymakers expect, Mr. Powell could find himself in a situation in which he must follow Mr. Volcker’s lead. The towering former Fed chair is best remembered for waging an aggressive — and painful — assault on the swift price increases that plagued America in the early 1980s.Mr. Volcker’s Fed rolled out policies that pushed a key short-term interest rate to nearly 20 percent and sent unemployment soaring to nearly 11 percent in 1981. Car dealers mailed the Fed keys from unsold vehicles, builders sent two-by-fours from unbuilt houses and farmers drove tractors around the Fed building in Washington in protest. But the approach worked, killing off the rapid price inflation that had festered throughout the 1970s.Mr. Powell was asked this month if the Fed was prepared to do whatever it took to control inflation — even if it meant harming growth, as Mr. Volcker did.“I hope that history will record that the answer to your question is yes,” the Fed chair replied.Few, if any, economists think that the 2022 Fed will need to repeat Mr. Volcker’s policies to the same degree, in part because the central bank is taking action much more quickly. The Fed is expected to begin raising interest rates from near zero at its meeting this week, and is likely to signal that it expects to make a series of moves this year as it tries to cool down the economy and control inflation.Price increases had run high for more than a decade by the time Mr. Volcker became chair in 1979, making them a part of everyday lives. Shoppers expected prices to go up, businesses knew that, and both acted accordingly.This time, inflation has been anemic for years (until recently), and most consumers and investors still expect costs to return to lower levels before long, survey and market data show. While inflation has been rapid for the past year, that is a comparatively short period and one that may not fuel the same kind of expectations for higher prices that bedeviled Mr. Volcker’s era.And while today’s inflation is taking a bite out of household budgets, it is slower than in previous periods: While it rose to 7.9 percent in February, the fastest pace since 1982, it is still well below a peak of 14.6 percent in 1980. Economists expect price gains to begin moderating this year, rather than climbing to such high levels.But in other ways, the backdrop Mr. Powell faces is beginning to look eerily similar to the one Mr. Volcker confronted.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: Times readers sent us their questions about rising prices. Top experts and economists weighed in.How Americans Feel: We asked 2,200 people where they’ve noticed inflation. Many mentioned basic necessities, like food and gas.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.Wages are increasing rapidly, and employers report raising prices to cover their bigger labor bills, posing the possibility of a more muted version of the wage-price spiral that helped keep inflation high during Mr. Volcker’s years.President Ronald Reagan with Paul A. Volcker, the Fed chair, in 1981.Scott Applewhite/Associated PressOil prices are climbing as Russia wages war on Ukraine, mirroring oil price shocks that rocked the economy in the years before Mr. Volcker’s ascent to the chair. The Arab oil embargo of 1973-74 and the Iranian revolution of 1979 both curtailed supply and sharply pushed up pump prices.And geopolitical instability is fueling uncertainty about what will happen next, much as it did in the 1970s, when war raged in Vietnam.“That’s the proper historical reference for what we’re trying not to replicate,” Mr. Powell said of the 1970s during separate remarks to Congress this month. “One of the things that is different now is that central banks — including the Fed — very squarely take responsibility for inflation.”When inflation was taking off in the 1960s and 1970s, Fed officials bickered about how high to raise rates as they worried about hurting the labor market too much. Many economic historians now think that their reluctance to act more quickly allowed those price gains to become locked in until they required a more draconian response.“The one really big difference — huge difference, consequential difference — is that the Fed, and the country, lived through the 1970s,” Donald Kohn, a former Fed vice chair, said in an interview. “I think the Fed is determined not to let us get there.”The inflation challenge facing Mr. Powell, who was renominated by President Biden for a second term as chair and is awaiting Senate confirmation, is the latest economic test that he has had to contend with during his tenure.Mr. Powell, 69, began his first four years as Fed chair in early 2018. By that Christmas, the central bank’s campaign of steady rate increases intended to fend off inflation had collided with President Donald J. Trump’s trade war to send markets plummeting.In 2019, Mr. Trump publicly pushed for lower rates and accosted Mr. Powell — whom the president had chosen to lead the central bank — in interviews and on Twitter, calling him a “bonehead,” an “enemy” and a golfer who could not putt.Then came the onset of the pandemic in 2020, and Mr. Powell and his colleagues crossed red lines and upended norms to rescue markets and the economy. They averted a financial crisis, but 2021 brought with it a new challenge: rapid inflation.Now, critics are questioning whether the monetary help that Mr. Powell’s Fed unleashed to protect the pandemic-stricken economy — lowering rates to near zero and buying trillions of dollars in government bonds — combined with huge fiscal stimulus to supercharge demand and release an inflationary genie that could prove hard to trap.The Fed has already begun removing some of that support, stopping bond purchases and communicating plans to raise interest rates by a quarter-point this month and steadily throughout the rest of the year. Mortgage rates have already begun climbing in anticipation of those actions.But some are asking whether the Fed, which wanted to see full employment return before paring back its support, has been too slow to react to changing conditions.This moment “represents a decade of economic experience in the late 1960s and 1970s, compressed into a year,” said Lawrence H. Summers, a former Treasury secretary who spent last year warning that inflation was going to take off as the government overstimulated the economy.Inflation F.A.Q.Card 1 of 6What is inflation? More

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    CPI Is Expected to Put Inflation at 7.8% for February 2022

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    Prices in the year though February were expected to have risen 7.8 percent, which would be the fastest pace of inflation in 40 years as gas prices increased and an array of goods and services became more expensive.Fresh Consumer Price Index data is set for release Thursday morning, and that estimate — the median in a Bloomberg survey of economists — underscores the grim reality facing economic policymakers. Climbing prices are hitting consumers in the pocketbook, causing their confidence to fall and stretching household budgets. The burden is falling most intensely on lower-income households, which devote a big chunk of their budgets to daily necessities that are rapidly becoming costlier.The quickest inflation in most Americans’ lifetimes is hurting President Biden politically, and the challenge could grow temporarily worse amid fallout from sanctions and other economic responses to Russia’s war in Ukraine, which has already pushed gas prices higher. Rising prices tend to make voters unhappy, posing trouble for Democrats ahead of the midterm elections in November.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: Times readers sent us their questions about rising prices. Top experts and economists weighed in.How Americans Feel: We asked 2,200 people where they’ve noticed inflation. Many mentioned basic necessities, like food and gas.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.They are also a problem for the Federal Reserve, which is in charge of achieving price stability. The central bank has signaled it will raise interest rates by a quarter percentage point at its meeting next week, likely the first in a series of moves meant to increase the cost of borrowing and spending money and slow down the economy. By reducing consumption and slowing the labor market, the Fed is able to take some pressure off inflation over time.“Mortgage rates will go up, the rates for car loans — all of those rates that affect consumers’ buying decisions,” Jerome H. Powell, the Fed chair, told Congress last week. “Housing prices won’t go up as much, and equity prices won’t go up as much, so people will spend less.”Even as the Fed prepares to rein in demand, high gas costs tied to the conflict in Ukraine threaten to keep inflation elevated for longer. They could become a serious issue for central bank policymakers if they help convince consumers that the burst in prices will last. If people begin to expect inflation, they may change their behavior in ways that make it more permanent — accepting price increases more readily and asking for bigger raises to keep up.This is just the latest instance, as far as prices go, in which what can go wrong does seem to be going wrong.Inflation F.A.Q.Card 1 of 6What is inflation? More

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    Federal Reserve Chair Pledges to Bring Inflation Under Control

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    Jerome H. Powell, the Federal Reserve chair, told senators on Thursday that policymakers were prepared to rein in inflation as they tried to fulfill their price stability goal — even if that came at an economic cost.“We’re going to use our tools, and we’re going to get this done,” Mr. Powell told the Senate Banking Committee.Mr. Powell has signaled that the Fed is poised to raise interest rates by a quarter percentage point at its meeting that ends March 16, and follow up with additional rate increases over the next several months. Fed officials are also planning to come up with a strategy for shrinking their vast holdings of government-backed debt, which will increase longer-term interest rates.The suite of policy changes will be an effort to weigh on demand, tamping down price increases that are running at their fastest pace in 40 years. The Fed aims for 2 percent price gains on average over time, but inflation came in at 6.1 percent in the year through January.Asked if the Fed was prepared to do whatever it took to control inflation — even if that meant temporarily harming the economy, as Paul Volcker did while Fed chair in the early 1980s — Mr. Powell said it was.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: We asked readers to send questions about inflation. Top experts and economists weighed in.What’s to Blame: Did the stimulus cause prices to rise? Or did pandemic lockdowns and shortages lead to inflation? A debate is heating up in Washington.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.“I knew Paul Volcker,” he said during his testimony. “I think he was one of the great public servants of the era — the greatest economic public servant of the era. I hope that history will record that the answer to your question is yes.”Mr. Volcker’s campaign against double-digit price increases pushed unemployment above 10 percent in the early 1980s, hurting the economy so severely that wages and prices began to slow down.But central bankers are hoping they can engineer a smoother economic cool-down this time.They are reacting much faster to high inflation than officials did in the 1960s and 1970s, and data suggests that consumers and businesses, while cognizant of inflation, have not yet come to expect rapid increases year after year. By cooling off demand a little, the Fed’s policies may work together with easing supply chain problems to bring inflation down without tossing people out of jobs.“Mortgage rates will go up, the rates for car loans — all of those rates that affect consumers’ buying decisions,” Mr. Powell said of the way higher rates would work. “Housing prices won’t go up as much, and equity prices won’t go up as much, so people will spend less.”The goal is to allow factories and businesses to catch up so shoppers are no longer competing for a limited stock of goods and services, creating shortages that enable companies to raise prices without scaring voracious buyers away.Inflation F.A.Q.Card 1 of 6What is inflation? More

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    Powell Says Rates Are Headed Higher, Even as Ukraine Poses Uncertainty

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    Jerome H. Powell, the Federal Reserve chair, told lawmakers on Wednesday that the central bank is poised to lift interest rates at its meeting this month as it tries to cool down high inflation — saying that while Russia’s invasion of Ukraine is ramping up economic uncertainty, it isn’t yet shaking the Fed off its course.Mr. Powell, testifying before the House Financial Services Committee, said the economic path ahead remained unsettled as Russia invaded Ukraine and the world reacted. He outlined with more clarity than usual how the Fed is thinking about policy in the coming months, saying, “We are going to avoid adding uncertainty to what is already an extraordinarily challenging and uncertain moment.”With inflation running hot, the labor market showing strength and the economy growing rapidly, the Fed’s leader said he thought a quarter-point interest rate increase would be appropriate at the central bank’s meeting, which will conclude on March 16. He expects the Fed to make a “series” of increases this year. And he thinks officials will agree to a plan for shrinking their balance sheet bond holdings in coming months, as they had been planning to do.“The question now really is how the invasion of Ukraine, the ongoing war, the response from nations around the world — including sanctions — may have changed that expectation,” Mr. Powell said. “It’s too soon to say for sure, but for now I would say that we will proceed carefully along the lines of that plan.”Mr. Powell emphasized that flexibility was critical, because it was too soon to know what today’s geopolitical tumult would mean for the American economy.Economists have said the conflict is likely to push up gas and other commodity prices, further elevating inflation — already, oil prices have shot higher. But at the same time, a combination of higher fuel costs and wavering consumer sentiment could be a drag on economic growth. Given the unclear effects on the American economy, Mr. Powell said, the Fed will need to remain “nimble.”The Fed chair and his colleagues must balance the risks that Ukraine poses to both inflation and growth against another pressing reality: Price gains in America had already been coming in high for about a year. Fed policymakers, who are tasked with maintaining stable prices, want to make sure that those quick increases do not become a permanent feature of the economic backdrop.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: We asked readers to send questions about inflation. Top experts and economists weighed in.What’s to Blame: Did the stimulus cause prices to rise? Or did pandemic lockdowns and shortages lead to inflation? A debate is heating up in Washington.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.“The game plan is to prevent recent high inflation outcomes from persisting,” Michael Gapen and his colleagues at Barclays wrote in a research report, summing up the crux of Mr. Powell’s testimony.Prices are increasing at the fastest pace in four decades, picking up by 7.5 percent over the year through January in the closely watched Consumer Price Index and by 6.1 percent in the Fed’s preferred inflation gauge, the Personal Consumption Expenditures index. The central bank aims for 2 percent inflation on average over time. Mr. Powell attributed the stubbornly rapid increases to strong consumer demand, especially for goods, that has “collided” with limited supply.“Admitting that inflation — proclaiming that inflation — is far too high, and that we are committed to using our tools to get it back down, it’s really about very, very high demand,” Mr. Powell said. “It’s a very different kind of inflation story than we’ve had in the past, but it’s one we have to deal with, and we will deal with it.”Mr. Powell said the Fed expected inflation to cool off this year as it raised interest rates, government pandemic relief spending faded and supply constraints cleared up. But officials are also closely monitoring factors that could keep it high.If price gains do not begin to come down in 2022, he said the central bank would be prepared to “move more aggressively” and make a larger-than-usual rate increase. Markets have expected that the Fed could increase rates, which are near zero, by half a percentage points at some meetings.“We will use our policy tools as appropriate to prevent higher inflation from becoming entrenched while promoting a sustainable expansion and a strong labor market,” Mr. Powell said.Drivers fueled up last month in Brooklyn. Economists have said the war in Ukraine is likely to push gas and other commodity prices higher.Amir Hamja for The New York TimesHis testimony underscored the tense political and economic moment that confronts the Fed — and policymakers across Washington — as a war rages overseas and inflation dominates headlines and spooks consumers at home.Today’s economy does have many bright spots, which Mr. Powell emphasized: Growth has been stronger than in many other advanced economies, and jobs are plentiful, creating opportunities for workers.“The labor market is extremely tight,” Mr. Powell said. He added that “employers are having difficulties filling job openings, an unprecedented number of workers are quitting to take new jobs and wages are rising at their fastest pace in many years.”Inflation F.A.Q.Card 1 of 6What is inflation? More

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    Federal Reserve Rolls Out Tough Trading Restrictions After Scandal

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    The Federal Reserve on Friday adopted a new set of ethics rules meant to prevent questionable financial market trading activity by top officials, a sweeping response to a scandal that has rocked the central bank since late last year.Fed officials traded in individual stocks, real estate securities and stock funds in 2020, a year in which the central bank rolled out a range of pandemic response programs that placed officials’ day-to-day decisions at the core of what happened in financial markets. Three high-ranking policymakers resigned earlier than they had planned after news of the trading broke last year and early in 2022.Jerome H. Powell, the Fed chair, acknowledged in the wake of the revelations that he and his colleagues were not “happy” with what had happened and said they would revamp the central bank’s ethics rules to prevent a similar situation in the future.The new rules, which were previewed in October, aim to fulfill that promise. They prevent senior officials from purchasing individual stocks or funds tracing business sectors, the Fed said, and they ban investments in individual bonds, cryptocurrencies, commodities or foreign currencies, among other securities.Senior Fed officials must now announce that they are buying or selling a security 45 days in advance, and that notice will not be retractable. Investments must be held for at least one year under the new guidelines.The Fed’s 12 regional bank presidents will be required to publicly disclose securities transactions within 30 days, the way that its seven board members in Washington already do. They must post financial disclosures on their bank websites, something they now do only sporadically.The fresh set of rules will apply to a wide array of personnel with access to sensitive information, from reserve bank first vice presidents and research directors to high-ranking staff members and people designated by the chair.The Fed will also extend its financial trading blackout period — which typically applies in the run-up to Fed meetings — by one day after each meeting. That will align it with the period in which Fed officials are not allowed to give speeches.Most of the restrictions will take effect on May 1, although the new rules on the advance notice and preclearance of transactions will take effect on July 1.Financial disclosures released in late 2021 showed that Robert S. Kaplan, the former Federal Reserve Bank of Dallas president, had made big individual-stock trades, while Eric S. Rosengren, the Boston Fed president, had traded in real estate securities. Mr. Kaplan resigned in September, citing the scandal; Mr. Rosengren resigned simultaneously, citing health issues.Richard H. Clarida, then the Fed’s vice chair, sold and then rapidly repurchased a stock fund on the eve of a major Fed decision, corrected financial disclosures showed. Mr. Clarida also resigned slightly earlier than planned, though he did not cite a reason. More

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    January Fed Minutes Show Concern About Inflation's Spread

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    Officials at the Federal Reserve expressed concern about inflation at their meeting in January, in particular that it had spread beyond pandemic-affected sectors into other areas, and agreed it would be warranted to begin scaling back their support for the economy faster than they previously had anticipated, minutes of the meeting released Wednesday showed.Fed officials noted that the labor market remained strong, though the Omicron wave of the coronavirus had worsened supply chain bottlenecks and labor shortages, and that inflation continued to significantly exceed the levels the central bank targets.Most officials still expect inflation to moderate over the year as pandemic-related supply bottlenecks ease and the Fed removes some of its support for the economy. But some participants warned that inflation could continue to accelerate, pointing to factors like rising wages and rents. If inflation does not move down as they expect, most Fed officials agreed that they might need to pare back their support for the economy even more quickly, though that could carry some risk.The outlook for inflation could be worsened by China’s zero-tolerance policy toward Covid, which has led to expansive lockdowns that have shuttered factories; a clash in Ukraine that could push up global energy prices; or the spread of another variant, they said.The central bank emphasized that the pace of interest rate increases would hinge on how the economy developed. But most officials agreed that the Fed should take a faster approach to cooling the economy than it did in 2015, when it began raising rates at a slow and plodding pace in the wake of the Great Recession.“Most participants suggested that a faster pace of increases in the target range for the federal funds rate than in the post-2015 period would likely be warranted, should the economy evolve generally in line with the committee’s expectation,” the minutes read.Fed officials also agreed that it was appropriate to proceed with plans to trim the nearly $9 trillion in securities that the central bank holds. Most officials preferred to keep to a schedule announced in December, which would end such purchases starting next month, though some viewed an earlier end to the program as warranted and a way to signal that they were taking a stronger stance to fight inflation.Policymakers said the labor market had made “remarkable progress in recovering from the recession associated with the pandemic and, by most measures, was now very strong.”The January meeting solidified what markets had been anticipating: that the Fed was on track to raise interest rates in March. The question now is how quickly, and by how much. Many investors have speculated that the Fed could raise its interest rate by half a percentage point in March, instead of its usual quarter-point increase.In a statement after their two-day policy meeting in January, Fed officials laid the groundwork for higher borrowing costs “soon.” Jerome H. Powell, the Fed chair, said at a news conference after the meeting that “I would say that the committee is of a mind to raise the federal funds rate at the March meeting, assuming that the conditions are appropriate for doing so.”Inflation has continued to run hot since the Fed’s last meeting, and wage growth remains elevated. A key inflation measure released last week showed that prices were climbing at the fastest pace in 40 years and broadening beyond pandemic-affected goods and services, a sign that rapid gains could prove longer lasting and harder to shake off.January’s Consumer Price Index showed prices jumping 7.5 percent over the year and 0.6 percent from the prior month, exceeding forecasts. A separate inflation gauge that the Fed prefers also showed that prices remained elevated at the end of 2021. Overall, prices have been climbing at the fastest pace since 1982.Wall Street is now anticipating that interest rates could rise to more than 1.75 percent by the end of the year, up from near zero now. Markets began to bet on a double-size rate increase after January’s inflation data came in surprisingly strong. But some Fed officials have been tempering those expectations, saying they need to take a steady approach.Mary C. Daly, president of the Federal Reserve Bank of San Francisco, said on Sunday that the Fed needed to get moving but that its approach ought to be “measured.”“I see that it is obvious that we need to pull some of the accommodation out of the economy,” Ms. Daly said on “Face the Nation.” “But history tells us with Fed policy that abrupt and aggressive action can actually have a destabilizing effect on the very growth and price stability we’re trying to achieve.” More