Federal Reserve Chairman Jerome Powell is about to appear before Congress with a big task: to convince lawmakers that he is determined to cut inflation while not dragging the rest of the economy down.

Markets were in suspense, wondering if he could pull it off. Sentiment has been more upbeat in recent days, but that could soon turn the other way if the central bank leader stumbles during his semi-annual monetary policy testimony this week.

“He has to post two messages here,” said Robert Teeter, head of investment policy and strategy at Silvercrest Asset Management. “One of them echoes some of the comments he made that there has been some progress on inflation.”

“The second point is we really need to be persistent in terms of the prospect of interest rates remaining high. He will probably repeat the message that interest rates will remain high for some time until inflation is clearly resolved,” Teeter said.

If he takes that position, he’s likely to face some criticism, first from the Senate Banking Committee on Tuesday, followed by the House Financial Services Committee on Wednesday.

Democratic lawmakers in particular are concerned that the Powell Fed risks dragging down the economy, especially those at the lower end of the wealth scale, with its determination to fight inflation.

The Fed has raised its benchmark rate eight times over the past year, most recently by a quarter of a percentage point early last month, pushing overnight rates to a target range of 4.5%-4.75%.

Markets have also fluctuated between wanting the Fed to cut inflation and fearing it goes too far. The central bank’s slow start in tackling the rising cost of living has raised fears that there is virtually no way to lower prices without sparking at least a modest recession.

“Inflation is a pernicious problem. It was made worse by the Fed not acknowledging it in 2021,” said Komal Sri-Kumar, president of Sri-Kumar Global Strategies.

Sri-Kumar believes the Fed should have attacked earlier and more aggressively, for example with a 1.25 percentage point hike in September 2022, when inflation, as measured by the consumer price index, was 8.2% on an annual basis. Instead, the Fed began tapering off the size of its rate hikes in December.

Now, he said, the Fed will probably have to bring its fund rate down to about 6% before inflation eases, and that will wreak economic havoc.

“I don’t believe in this no-landing scenario,” Sri-Kumar said, citing a theory that the economy will experience neither a “hard landing,” which would be a steep recession, nor a “soft landing.” would be a less deep downturn.

“Yes, the economy is strong. But that doesn’t mean you’re going to slide past without any recession,” he said. “If you have a no-landing scenario, then you accept 5% inflation, and that’s politically unacceptable. He has to work on bringing inflation down, and because the economy is so strong, it will slow down. But the more delay you have in a recession, the deeper it will be.”

Powell, in turn, will have to find a landing spot among the conflicting policy views.

A monetary policy report released by the Fed to Congress on Friday, which serves as an opener to Powell’s testimony, repeated oft-used language that policymakers expect “continuous hikes” in interest rates.

The chairman is likely to strike “a tone that is both determined and measured,” Krishna Guha, head of global policy and central bank strategy at Evercore ISI, said in a note to a client. Powell will note the “resilience of the real economy” as he warns that inflation rates have gotten higher and the road to taming them “will be long and bumpy”.

However, Guha said Powell is unlikely to push a rate hike of half a point or 50 basis points later this month, which some investors fear. Market prices on Monday indicated about a 31% probability for the bigger move, according to data from CME Group.

“We think the Fed will raise 50 basis points in March only if inflation expectations, wages and services inflation become dangerously higher and/or data inflows are strong enough to eventually push the median peak up 50,” Guha wrote. “The Fed cannot end a meeting further from its destination than before the meeting began.”

However, interpreting the data will be difficult in the future.

Headline inflation may even drop sharply in March, as year-on-year comparisons of energy prices will be biased due to a price increase around this time last year. The Cleveland Fed’s tracker shows a decline in headline inflation from 6.2% in February to 5.4% in March. However, core inflation, excluding food and energy, is expected to rise from 5.5% to 5.7%.

Guha said it’s likely Powell could push the Fed’s endpoint for rate hikes — the “terminal” rate — to a range of 5.25%-5.5%, or about a quarter of a point higher than expected in the economic projections of December from policymakers.