(Bloomberg) — Federal Reserve officials face their biggest challenge in months as they weigh whether to continue raising interest rates this week to cool inflation, or amid market turmoil fueled by recent bank failures should take a break.

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Ahead of the Silicon Valley bank collapse and its aftermath, Fed policymakers were poised to hike rates by as much as 50 basis points after a slew of data suggested the economy was much stronger than officials had been at the start of the year had accepted.

Amid financial market volatility, many Fed watchers are now expecting a smaller quarter-point hike, and some say the Federal Reserve will be on pause altogether after a two-day meeting that begins Tuesday.

The decision follows a 50 basis point rate hike by the European Central Bank on Thursday. President Christine Lagarde said the ECB remains committed to fighting inflation while closely monitoring bank tensions.

Also eagerly awaited at the Fed meeting is an update to the economic forecast summary — a quarterly report that includes participants’ forecasts for everything from inflation to interest rates — and Chair Jerome Powell’s post-meeting press conference.

Amid the turmoil in the banking sector, Powell is likely to face questions about the central bank’s oversight of SVB and other troubled companies.

He also needs to exercise caution when discussing the likely future direction of interest rates. Before the banking problems surfaced, Fed officials had hinted that interest rates would need to rise above 5% this year and stay there until inflation fell back towards its 2% target.

Heightened uncertainty about how bank capitalization issues — exacerbated by the Fed’s rapid rate hikes and impact on Treasury yields — will impact the broader economy could limit Powell’s ability to tighten much more going forward.

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What Bloomberg Economics Says…

“The FOMC faces its most challenging policy decision in recent memory on March 22nd. Market expectations have shifted sharply – from a 50 basis point hike to a pause – as fears of bank contagion eclipsed inflation worries. We expect the Fed to hike interest rates by 25 basis points and raise the ceiling to 5% from 4.75%. Reaccelerating inflation keeps the pressure going higher.”

— Anna Wong, Chief US Economist. For a full analysis click here

Elsewhere, 12 other central banks set policy over the coming week. Economists are forecasting rate hikes in the UK, Switzerland, Norway, Nigeria and the Philippines, while Brazil and Turkey are likely to hold. Meanwhile, traders betting on the Bank of Canada rate path will get a new inflation readout.

Click here to see what happened last week and below is our rundown of what’s coming in the global economy.

Asia

On Monday, the People’s Bank of China is likely to report that banks have left interest rates unchanged as the economy gradually recovers.

In Tokyo, a summary of sentiment from the Bank of Japan meeting earlier this month will shed more light on the reasons why monetary policy should be kept stable ahead of Kazuo Ueda’s arrival at the helm in April.

Reserve Bank of Australia official Chris Kent could offer an update on Monday on political stance and any concerns over financial market contagion. Those remarks will likely prove more timely than the RBA’s March meeting minutes, due Tuesday.

Early trade numbers from South Korea offer a pulse check on global conditions.

Japan’s inflation figure on Friday is expected to echo earlier data that indicated a slowdown in prices, helped largely by newly subsidized utility bills.

Hong Kong and Taiwan central banks are due to announce interest rates on Thursday.

Europe, Middle East, Africa

The Fed may be the dominant central bank decision this week, but several others will also draw investor attention.

The Bank of England is at the heart of Europe. Officials are awaiting the latest UK inflation reading on Wednesday, which may show price growth is still near double digits. Most economists are predicting a quarter-point hike in interest rates next day, although a minority see no change as financial tensions still simmer.

Here’s a quick rundown of the other decisions that are due:

• Thursday’s Swiss National Bank meeting is a quarterly meeting and has some catching up to do so is widely expected to increase by up to 50 basis points. The result was overshadowed by Credit Suisse Group AG, the ailing bank that has offered a lifeline to stem the global turmoil.

• The same day in Norway officials are expected to hike rates by another quarter point to extend the cycle of monetary tightening in the oil-rich economy.

• An Icelandic decision is due on Wednesday, with another big rate hike on the horizon.

Looking south, central banks will also be very active. Here is a short summary:

• Nigeria could hike interest rates on Tuesday to stem inflation, which is near an 18-year high, and to encourage investment.

• In Angola on the same day, officials could cut benchmark borrowing costs for the second time this year as the Kwanza remains steady, commodity prices ease and a downward slump in price growth is likely to continue.

• In Morocco, the central bank will most likely pause monetary tightening on the day as food prices start to ease.

• And in Turkey, officials are expected to hold rates steady on Thursday. Any signs of future policy will be crucial as the country heads into May’s elections, which will see President Recep Tayyip Erdogan face the toughest challenge of his two decades in power.

After Thursday’s ECB meeting, which ended with a half-pint hike but no future guidance, more than a dozen of its policymakers are set to speak in the coming days. President Lagarde is likely to draw the most attention with her testimony before the European Parliament on Monday.

More clues to the background of the banking system could be available when her ECB colleague Andrea Enria, the euroregion’s top regulator, addresses the same body of lawmakers the next day.

Lagarde is also among the officials set to take the stage at Wednesday’s conference of the ECB and its observers in Frankfurt, and several others are scheduled to appear elsewhere throughout the week.

Meanwhile, purchasing managers’ indices in the eurozone and the UK will give an indication of industry strength as China reopens and the German Council of Economic Experts will issue an updated growth outlook.

Latin America

A busy week in Brazil begins with the central bank’s survey of market expectations for inflation to remain above target through 2025.

Banco Central do Brasil is all but certain to hold interest rates at 13.75% for a fifth straight meeting, although policymakers could adopt a dovish tone in the statement following the decision.

After minimal disinflation in the last three mid-month consumer price readings, analysts are expecting a steeper deceleration for mid-February and second-quarter numbers on base effects, before picking up in the second half.

Chile’s fourth-quarter manufacturing report may show that the Andean country narrowly avoided sliding into a technical recession, in part due to untapped fiscal liquidity and the impact of China’s reopening.

In Argentina, four consecutive negative readings on its monthly economic activity indicator point to a quarterly contraction in production heading for a challenging 2023.

In Mexico, retail sales weakness seen since May is likely to have continued into January, while slumping demand from the US, the country’s largest export market, can be expected to weigh on January GDP proxy data.

Early consensus is for mid-month inflation to be near a 1-year low – albeit still more than double the 3% target – while the slightly stickier headline reads a fall from November’s two-decade high of 8.66 % extends Banxico forecasts.

–Assisted by Robert Jameson, Malcolm Scott, Sylvia Westall and Stephen Wicary.

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