The Fed has a very tough decision to make at the upcoming March 15-16 policy meeting. I would argue that the choice between raising the Fed Funds rate yet again versus leaving the rate unchanged will be the toughest decision the Fed has had to make since slashing rates to near zero in 2008 amidst the Great Recession.

It is no secret that the Fed has wanted to raise the Fed Funds rate for well over a year. Former Fed Chairman Ben Bernanke made it clear that he wanted to raise the Fed Funds rate back in 2014. Current Fed Chair Janet Yellen likewise made it clear that she wanted to raise the Fed Funds rate when she took over the central bank in January 2015.

Yet it was not until December 16 last year when the Fed finally decided to raise the Fed Funds rate from near zero by 0.25%, the first increase in nearly a decade. At that time, the Fed issued forward guidance suggesting it would raise the rate four more times in 2016. Most Fed-watchers assumed that would mean another quarter-point hike at the March, June, September and December FOMC meetings this year.

But things have not gone as the Fed (or anyone) expected so far this year. From the first trading day of the New Year on January 4, the stock markets have plunged around the world – for no obvious reason. Fears of a new recession are widespread. So what’s the Fed to do?

Here’s another new wrinkle. The Fed has been telling us for the last couple of years that its inflation target is 2%. Yet inflation has not been cooperating, remaining closer to zero than the Fed’s target. That is until last month. The Department of Labor reported last Friday that the “core” Consumer Price Index – less food and energy – rose a surprising 2.2% for the 12 months ended in January. That was far higher than expected.

While the Fed’s preferred measure of inflation, the core Personal Consumption Expenditures Index (PCE), remains below 2%, there is little doubt that the policy committee members took more than a passing look at the surprise jump in the core CPI last Friday. If this trend continues, that puts even more pressure on the Fed to raise rates.

Add to that the fact that consumer spending is rising and the unemployment rate is at an eight-year low of 4.9%, and the Fed’s dilemma becomes even more challenging.

And let’s not forget that most central banks around the world are still trying to stimulate their economies by slashing interest rates and implementing aggressive quantitative easing bond buying programs.

Adding to the Fed’s dilemma is the fact that the US economy stalled to GDP growth of only 0.7% in the 4Q, down from 2.0% in the 3Q and 3.9% in the 2Q. That 0.7% GDP growth in the 4Q is expected to be revised lower to only 0.4%-0.5% on Friday in the latest Commerce Department update. If so, that will put more pressure on the Fed to hold off.

I should mention that the recent uptick in inflation does not somehow invalidate all the other signs that have pointed to a rapidly decelerating economy. Just because inflation picks up, that does not mean that things are getting better. It could actually mean they are about to get a whole lot worse.

We could be facing “stagflation” (remember that word?) – a stagnant economy and high inflation. This is THE nightmare scenario for the Fed. If inflation catches fire now, the Fed will be completely incapable of controlling it. If a measly 25 basis-point rate hike could inflict the kind of damage we’ve already experienced, imagine what would happen if the Fed made a real attempt to raise rates to get out in front of rising inflation.

With economic growth already close to zero, a monetary shock of 1% or 2% interest rates could send us into a new recession. The Fed knows this.

For all the reasons cited above, and others, the Fed Open Market Committee is faced with a really difficult decision next month. On the one hand, it would seem obvious that the Fed should not hike rates on March 16 given the weakness in the economy and markets.

On the other hand, a majority of the Committee members may feel that a failure to increase the Fed Funds rate would raise issues of credibility and indecision. So it’s impossible to know what they will decide.

I expect the Fed to hold off at least until June, but I could be wrong. Stay tuned.