The Federal Reserve opened its two-day policy meeting on Tuesday amid signs of softening inflation which eases the pressure to raise interest rates, at least for now.
The central bank is not expected to move the benchmark lending rate Wednesday from the current target range of 0.75 percent to one percent.
Most economists say the Fed likely will stay the course and hike twice more this year, probably in June and September, despite a weak batch of economic indicators since it last raised rates in March.
But a few see low inflation and weak data as justification for the Fed to scale back and raise rates just once more later this year.
The question mark could be whether President Donald Trump follows through on campaign promises for big infrastructure spending programs as well as tax cuts, in a plan released last week, which could fuel faster growth, at least in the short term.
- Rate hikes in June? -
"My expectation is that they remain positioned to hike rates in June," Tim Duy, an economist at the University of Oregon and close Fed watcher, told AFP.
"If the data continues to disappoint, they will shift gears. But that is not my expectation."
The central bank has twice raised rates since December, given the steady job creation and some signs of mounting price pressures.
But figures released Monday showed the Fed's preferred measure of inflation, known as PCE, actually retreated and remains below the two percent target, while a key component of the index declined for the first time in 16 years.
Weak consumption also held down first-quarter growth to a three-year low of just 0.7 percent, after expansion of 2.1 percent in the final quarter of 2016.
While many economists discount the low growth as an anomaly frequently seen in data for the first quarter of the year, Jason Schenker, of Prestige Economics, said the Fed will be less aggressive than expected.
"We continue to believe that the Fed is likely to leave rates unchanged until September 2017," he said in a research note.
He noted the weak consumption in the first quarter -- a key driver of economic growth -- as well as weak auto sales as key factors.
- 'Markets gave them a pass' -
Mizuho Chief US Economist Steven Ricchiuto even questioned whether the Fed had justification for an increase in March.
"The Fed moved simply because markets gave them a pass. One more move this year instead of two."
Joel Naroff is one of many who disagree, noting that the economy is at full employment, with the unemployment rate at 4.5 percent, and inflation close to the Fed's two percent target.
"The members can look past the slow growth, especially since the first quarter numbers have been strangely low for quite some time," Naroff said of the Fed's policy-setting Federal Open Market Committee.
However, he said he expects the next rate hike to come at the July meeting, rather than June, "when the Fed will have the first reading on second quarter growth."
Barclays (LSE: BARC.L - news) economists agreed the weak data could push the next rate hike back, "but the bar to disrupting the Fed's plans (for two more rate increases) is higher now than it was in previous years."
- Wage gains 'accelerating' -
One key area of concern is coming from building wage pressures, as employment growth continues and employers report difficulty finding and retaining workers.
The Fed's beige book survey of the economy prepared in advance of this week's meeting notes reports across the country of firms that had to provide bonuses, and increase wages and benefits, and are still struggling to fill openings, even for low-skilled work.
Jim O'Sullivan of High Frequency Economics said, "Wage gains are unambiguously accelerating. Meanwhile, the trend in the unemployment rate still appears to be downward. These data will keep pressure on the Fed to keep tightening."