The rise in consumer prices, which pushed inflation to a four-decade high of 6.8 percent in November, has prompted the Federal Reserve to drastically alter its approach in recent weeks, with the goal of raising interest rates sooner and more frequently.

Since the COVID-19 pandemic triggered a deep recession in March 2020, the Fed has kept its key short-term rate near zero. However, at a two-day meeting beginning Tuesday, Fed officials are expected to accelerate the phaseout of their bond-bonding stimulus, paving the way for rate hikes as early as March.

Economists believe the Fed will announce that it will reduce the amount of Treasury bonds and mortgage-backed securities it has been purchasing to keep long-term interest rates low. The Fed announced in early November that it would reduce its monthly Treasury purchases of $80 billion and mortgage purchases of $40 billion by a total of $15 billion per month, with the purchases ending in June. Many economists believe the Fed will agree to double the rate of withdrawal to $30 billion per month, halting purchases as soon as March.

Fed Chair Jerome Powell has stated that officials are unlikely to add support to the economy by purchasing bonds at the same time they are withdrawing support by raising interest rates. As a result, the Fed wants to end its bond purchases sooner so that it can raise rates in early spring if inflation hasn’t slowed significantly by then. Previously, economists predicted that the Fed would not raise interest rates until June or later.

Just a few months ago, Powell and other Fed officials maintained that the inflationary surge was temporary, owing to large price increases for pandemic-related items such as used cars, airline flights, and hotel stays. However, the price increases have spread to other items, such as food, rent, gasoline, and furniture, and the supply-chain bottlenecks that have caused much of the inflation have proven to be more persistent.

Powell stated at a recent Congressional hearing, “I think it’s probably a good time to retire that word (transitory).”

The Fed’s policymakers forecasted one rate hike next year in September. According to Barclays economist Jonathan Millar, in new projections set to be released Wednesday, officials are likely to predict two rate increases in 2022 and three more in 2023. JPMorgan Chase’s Michael Feroli predicts that the Fed will raise interest rates three times next year. When the Fed raises interest rates, Americans typically pay a little more for everything from mortgages and car loans to credit card bills and student loans. However, bank savings and CD rates should rise as well, benefiting seniors and other savers.

Faster tapering of bond purchases and earlier rate hikes have already been priced into stocks, which have recently sold off in response to speculation about the Fed’s plans, according to Millar.

According to Morgan Stanley and Moody’s Analytics, supply-chain bottlenecks have already begun to ease. Price increases should begin to moderate, but not sufficiently to prevent the Fed from acting as soon as March, according to Millar. Goldman Sachs expects the first hike in May, while Morgan Stanley expects it in September.

Keep in mind that the Fed has pledged to keep its key rate near zero until inflation exceeds its 2% target “for some time” and the economy reaches full employment. So, even if inflation eases slightly, the first condition has been met, and with unemployment at 4.2 percent, the economy is close to meeting the second, according to Millar.

Will higher inflation rates help to reduce inflation? Usually, they do. Higher interest rates should result in fewer home and car purchases, as well as possibly less credit card use. Less consumer demand should result in more modest price increases. However, Millar believes that Americans are still flush with cash from stimulus checks and eager to travel and engage in other activities, so it’s unclear how much they’ll cut back. Furthermore, the current bout of inflation is primarily the result of supply snarls, which will be unaffected by rate hikes.

Higher interest rates, on the other hand, may temper stock market gains by limiting the additional purchases people make when they feel wealthier.