Washington: The Federal Reserve is expected to raise interest rates at its first policy meeting under Chairman Jerome Powell and may signal more hikes are coming in response to tax cuts and government spending that could further stoke a robust U.S. economy.
The U.S. central bank projected late last year that it would lift rates three times in 2018, but some investors believe the fiscal stimulus and recent hints of inflation pressures will push policymakers to add an additional increase to the mix.
The Fed is scheduled to issue its latest policy statement at 2 p.m. EDT (1800 GMT).
Analysts are split over whether the Fed, which is wary of an early misstep under its new leadership, will raise policy tightening expectations until more price pressures are clearly evident, especially given outside risks to the economy such as a possible global trade war.
The Fed's drive to stimulate the world's largest economy in the wake of the 2007-2009 financial crisis and recession is drawing to a close. It raised its benchmark overnight lending rate three times last year, to a range of 1.25 to 1.50 percent, as joblessness fell and economic growth accelerated. It is expected to raise rates by another 25 basis points on Wednesday.
With futures markets anticipating another increase in June, Powell's Fed could leave its rate outlook unchanged until then to see how the economy absorbs the $1.8 trillion in stimulus expected from the Trump administration tax cuts and planned spending.
The central bank is expected to boost its economic growth forecasts for the next few years, and could project that the unemployment rate will fall well below the current 4.1 percent, which is seen as a low but stable level.
Seven of the 15 Fed policymakers who will update their forecasts on Wednesday have recently indicated the fiscal stimulus could boost their expectations for the economy, rate hikes, or for both, according to an analysis of public statements.