Fed chief Jay Powell has the thankless task of dampening consumer enthusiasm or the bank’s credibility will take a hit.

But with such fickle inflation, the Federal Reserve risks sending the economy into recession if rate hikes go on beyond February.

On Wednesday, the Fed announced its 4th consecutive “jumbo” interest rate hike of 75 basis points. So the benchmark federal funds rate is a range of 3.75% to 4%.

The next two moves will be in smaller steps, according to the U.S. central bank’s own projections. Rates are expected to peak at 4.5% to 4.75% in 2023.

With this strategy, the rate at which consumer prices are rising falls from its current 8% to 2%, and unemployment rises, modestly, to around 4.5%. That’s Fed’s wanted upshot.

Of course, there’s the risk of this not happening, since the current environment is new and unusual.

Supply-chain blockages are about the only major sign that inflation is coming down.

Even if consumers still have money to spend on more expensive goods and services, having fewer products since deliveries are slow could tame inflation.

But just enough as a 3% rate could put Fed into a corner. The rise in job openings in September doesn’t do well with the plan, suggesting an economy running hot.

The nightmare scenario is one where inflation subsides to a level above its target and then plateaus.

Fed’s goal for inflation is 2% and the bank struggled for years to get it up there. Now it’s trying to get it down.

One option for the central bank is to keep tightening its monetary policy.

If politics wouldn’t be a concern for the Fed, stressing borrowers and pushing equity markets lower should not be something to care about.

After all, a recession is the quickest way to bring inflation down, although painful.

But this could become a political issue if the paper wealth of America’s affluent goes up in smoke, as Reuters notes.

Moving the goalposts after twelve years since the 2% target was officially taken up by the Fed would be the alternative.

But that would look like an admission that the Fed has failed in its targeting of inflation.

Besides, Covid-years savings are about to finish, and consumers may retrench as their disposable income depletes.

Ultimately, inflation affects people’s spending power more directly than interest rate hikes do.

Although more increases may cause some drama, the Fed’s policy is meant to lower prices.

Powell, although may lose some friends, he’d probably wish to rather be more effective than popular.