WASHINGTON—For months, Chair Jerome Powell has held out hope that the Federal Reserve will be able to raise interest rates high enough to throttle rampant inflation without tipping the economy into recession.
Yet with the Fed set to announce another sharp interest rate hike after it meets this week, days after the government issued a scorching inflation report, the likelihood that the central bank can engineer a so-called “soft landing” appears to be dimming.
With inflation at a four-decade high of 8.6 percent, Fed officials are likely this year to boost borrowing rates even higher than was expected just weeks ago. The central bank may also signal, when its policy meeting ends Wednesday, the possibility of raising rates to a level that could weaken growth—elevating the risk of a recession….