Anticipation over a pullback in Federal Reserve stimulus has markets rolling, setting the stage for what could be a pivotal central bank policy-setting meeting this week.

Although the Fed has signaled it will very likely raise rates multiple times this year, the first post-COVID rate increase is not expected this week. Instead, the policy-setting Federal Open Market Committee will likely tease higher rates coming in its March meeting.

“It really is time for us to begin to move away from those emergency pandemic settings to a more normal level,” Fed Chairman Jerome Powell told Congress two weeks ago, adding that “2022 will be the year in which we take steps toward normalization.”

Moving away from those settings would involve raising the federal funds rate, the benchmark for short-term borrowing costs that the Federal Open Market Committee sets every six weeks. That rate has been set at near zero since the depths of the pandemic.

Raising those rates, also referred to as “tightening policy,” could dampen the rapid pace of inflation felt by Americans across the board.

“March is a live meeting for the first rate hike,” said Fed Governor Christopher Waller in December.

Directionally, nearly all members of the policy-setting Federal Open Market Committee have suggested they favor using higher rates to bring inflation down (even the more “dovish” officials who have historically pushed back against tighter policy options). But there is considerable uncertainty about how aggressively they would do so.

For example, betting markets show the largest probability — about 31% — for four interest rate increases (25 basis points each) by the end of this year. But those same markets are pricing in decent odds of the Fed tightening a little bit slower (three rate hikes: 26% chance) as they are for the Fed tightening a little bit faster (five rate hikes: 20% chance).

Either way, the Fed is making it clear that come the March meeting, FOMC decision days that follow are all fair game for more tightening.

“We see a risk that the FOMC will want to take some tightening action at every meeting until that picture changes,” Goldman Sachs analysts wrote on Friday.

Reducing the balance sheet

With prices rising at a pace not seen in nearly 40 years, the Fed may have opted to raise rates this week if it were not for one reason: its $9 trillion balance sheet.

The Fed is still in the process of bringing its pandemic-era policy of growing its massive balance sheet to a full stop. In December, the FOMC charted a course for ending its purchases of U.S. Treasuries and agency mortgage-backed securities (aimed at messaging to markets its intention to keep borrowing costs low) by mid-March.