Amid mounting turbulence, can the Fed engineer a soft landing?

AT ITS March Federal Open Markets Committee meeting, the US Federal Reserve raised interest rates by the expected 25 basis points and signalled 6 further hikes this year, one for each remaining meeting.

A week later, Fed chief Jerome Powell described inflation as being "much too high" and said, if necessary, rate hikes could be more than 25 points. This created quite a stir in the financial markets and the odds are now rising that the US central bank will become more aggressive in raising rates - according to the CME FedWatch Tool, the probability is better than 70 per cent that the Fed would reach 2.54 per cent by its Dec 14 meeting, including 50-point hikes at each of the next two meetings.

Aggressive though this may sound, an increasing number of observers have pointed out that, in order to combat US inflation, which is running at a 40-year high of 7.9 per cent, the Federal Reserve will have to raise interest rates above this level, to at least 8-9 per cent, and that 2.54 or 3 per cent will not suffice.