The US Central Bank is about to begin a two-day policy meeting with officials widely expected to keep interest rates at current levels for now, but will signal in economic projections whether they still feel rates need to be raised further before the end of the year.
Investors in contracts linked to the federal funds rate consider it almost certain that the US central bank will leave the reference federal funds rate at the current range of between 5.25% and 5.5%, a move that parallels the Fed's shift to a period of slower, more prudent rate increases.
From March 2022 to May 2023, the Fed raised rates at 10 consecutive meetings in order to combat rising inflation.
In June, the Fed halted rate hikes, but the quarterly economic projections accompanying the decision showed that 12 of 18 policymakers still expected a rate hike of two quarter points by the end of the year.
While a slower move by the data-driven Fed may have led officials to miss neutrality in September, analysts said that not much recent economic news would prompt policymakers to rule out the latest rate hike.
In addition, data since the last Fed meeting although generally supportive of the view of inflation slowing along with continued economic growth is somewhat mixed as the rate of recent headline price increases is seen to soar.
Policy officials, and Powell in particular, are also reluctant to show any signs of backing off in their fight against inflation, even if it means higher-than-expected interest rates and greater risks to the economy.
Higher rates cause banks and finance companies to raise their own rates for things like home loans, business loans, credit cards, and various other types of financing that stifle household investment and spending.
Closing the door to further rate hikes now could cause overall monetary conditions to loosen as markets value lower rate levels, which is the opposite of what the Fed wants as long as inflation remains under control.
The decision of the meeting this time may already involve complicated communication changes, because the Fed had to take a cautious step in deciding to increase the policy rate again.
