All of which has convinced most Fed officials that it’s time for another rate hike.
The Fed held interest rates at a low level for years after the financial crisis, supporting the economic recovery by encouraging investors to take risks and businesses and consumers to borrow money. By raising interest rates, the Fed is gradually reducing the magnitude of that stimulus.
Ms. Yellen has said that another rate increase, like the Fed plans on Wednesday, would leave rates in a neutral range — neither stimulating the economy nor seeking to restrain growth.
What about inflation?
The only major question mark is the persistent sluggishness of price inflation, which is on pace to undershoot the Fed’s 2 percent annual target for the sixth consecutive year.
Ms. Yellen and other Fed officials are convinced that inflation will gain strength in the coming months. Employers across the country are reporting increased difficulty in finding enough qualified workers. The most obvious solution is to offer higher wages, leading to higher prices.
But some Fed officials are concerned the Fed itself is contributing to the weakness of inflation.
Charles Evans, president of the Federal Reserve Bank of Chicago, argues that the Fed may be undermining inflation expectations by failing to demonstrate a determination to drive up the pace of inflation. And expectations about future inflation help to determine the pace of price increases.
If Wednesday’s decision to raise interest rates is not unanimous, the concern about inflation is the most likely reason.
What comes next?
With Wednesday’s rate hike a foregone conclusion — investors have put the chances at 100 percent — attention is mostly focused on what the Fed has to say about next year.
The Fed predicted in its last round of forecasts, in September, that it would raise rates three times in 2018 and twice more in 2019. Growth has since been stronger than the Fed expected, and a tax cut could shovel a little more coal into the engine, further fueling growth.
Some Wall Street firms, including Goldman Sachs, predict that the Fed will end up raising rates four times next year as a response to stronger growth. Goldman also expects the Fed will raise rates three times in 2019, one more than the Fed’s September forecast.
But the Fed may not change its official forecasts on Wednesday. Fed officials are wary of injecting the central bank’s views into the final stages of the political debate about tax cuts.
Mr. Powell said at his Senate confirmation hearing last month that the Fed did not plan to analyze the economic impact of the tax cuts until a final version of the bill is signed into law, which is expected to happen by Christmas.
A changing of the guard.
The Fed’s course will be charted under new leadership. Ms. Yellen is scheduled to preside at one more meeting of the monetary policy committee, in late January, before stepping down in early February, assuming Mr. Powell is confirmed.
Other senior officials also have recently departed or are planning to do so.
Stanley Fischer resigned as the Fed’s vice chairman in October. William C. Dudley, the president of the Federal Reserve Bank of New York, said he plans to step down in mid-2018.
Replacements for Mr. Fischer and Mr. Dudley have not been announced, but Mr. Trump has already nominated a pair of new Fed governors: Randal K. Quarles, already installed as the vice chairman of supervision, and Marvin Goodfriend, who is awaiting Senate confirmation.
And three more of the seven seats on the Fed’s board remain open and ready for Mr. Trump to fill.
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