AP Economics Writer

WASHINGTON — With inflation rising in a fast-rebounding economy, the Federal Reserve is poised this week to discuss when it will take its first steps toward dialing back its ultra-low interest rate policies.

It will be a fraught discussion, one likely to occur over several months. Yet the escalating inflation that has forced consumers and businesses to pay more has intensified pressure on the Fed to ensure that rising prices don’t become entrenched in consumers’ outlooks. If Americans start to anticipate higher prices, they might take actions — such as accelerating their purchases before prices rise further — that could send inflation even higher.

The Fed faces a dilemma: On the one hand, inflation is rising much faster than it had projected earlier this year, though the Fed has characterized the price pressures as “transitory,” a consequence of supply shortages and a fast recovery. On the other hand, hiring has been slower than the benchmark that Chair Jerome Powell mentioned at a news conference after the Fed’s most recent meeting in late April.

Powell said at the time that he would want to see a “string” of hiring reports showing about 1 million added jobs each month. The job market has yet to reach that total in any month this year, though employers have posted a record-high number of open jobs.

With the economic picture still clouded by the chaos of reopening from the recession, no major decisions are expected Wednesday when the Fed’s latest policy meeting ends and Powell holds a news conference. The Fed is set to keep its key short-term rate near zero and to continue buying $120 billion a month in Treasury and mortgage bonds. Those purchases are intended to keep longer-term rates low to encourage borrowing and spending.

But the Fed’s policymaking committee appears likely to start discussing the timing and mechanics of gradually reducing its bond purchases. Communicating that decision to the public will be a sensitive task. If the Fed indicates that it will taper its purchases earlier than markets expect, it risks a repeat of the “taper tantrum” in 2013.

That occurred when then-Chairman Ben Bernanke jolted financial markets by suggesting that the Fed could taper its bond purchases “in the next few meetings” — sooner than traders had expected. Bernanke’s remarks sent longer-term bond yields surging.

Having learned from that incident, Powell will likely have any tapering action follow the Fed’s 2017 decision to slowly reduce the bond holdings it had accumulated after the Great Recession. The first hint of that plan emerged six months before a final decision was made. Economists expect a similar timeline now, which suggests that any tapering won’t occur before year’s end.

Last week, the government reported that inflation jumped to 5% in May compared with a year earlier — the largest 12-month spike since 2008. The increase was driven partly by a huge rise in used car prices, which have soared as shortages of semiconductors have slowed vehicle production.