With inflation pressures showing no signs of abating, economists see the Federal Reserve on auto-pilot this week, delivering a 0.75 percentage point rate hike to push its benchmark rate up to 2.25 -- 2.5%. The expected move will put the pace of Fed tightening at the fastest pace since early 1981.
It meets the Fed's first goal of getting the benchmark rate back to a historic "neutral" setting that doesn't spur the economy.
Here are four things that economists and investors will be listening to after the Fed meeting and at Fed Chairman Jerome Powell's press conference.
What about September?
Forward-looking markets are already debating whether the expected rate hike in September is a half percentage point move or another 0.75 percentage point hike.
Will Powell be explicit about the size of the upcoming move, as he did at the last two press conferences?
Economists at Deutsche Bank think Powell will issue similar guidance, which is that Fed officials "will likely decide between a 50bp and a 75bp move in September."
The Fed's next policy decision is on Sept. 21 -- two months away. There will be two reports on consumer price inflation and two job reports before the meeting, so many economists think Powell won't offer the same guidance.
An end to the super-sized hikes?
Related to September, markets will be listening carefully to see if Powell validates current market pricing that the Fed will slow the pace of tightening in September due to mounting concerns about the economy.
Fed watchers note that Powell said that he didn't think 0.75 percentage point moves were ordinary.
But it is a tricky pivot. The Fed doesn't want the step-down to appear dovish, which might inadvertently trigger an unwanted easing of financial conditions, said Tim Duy, chief U.S. economist at SGH Macro Advisors.
Read:Markets have been quick to price in a Fed pause, that might not work out
The yield on the 10-year Treasury note has fallen below 3% from close to 3.5% at the last Fed policy meeting.
As a result, Ellen Zentner, chief U.S. economist at Morgan Stanley, thinks Powell will "deliver a message that leaves markets guessing as to whether the next move could be a step down to 50bp or a steady 75bp."
Will there be a recession?
Michael Gapen, U.S. economist at Bank of America Securities, thinks Powell will say that the Fed's base case remains for a soft landing for the economy. If pressed, Powell will acknowledge that a downturn in activity or a sharper rise in unemployment "cannot be ruled out."
Gapen thinks there will be a mild recession later this year, based on the Fed's communication that the Fed believes that fighting inflation is their number one job.
"They know deep down in their bones that inflation is on them," Gapen said, in an interview.
Greg Daco, chief economist at EY Parthenon, said he senses that policymakers realize "there is no easy way out" of the current economic environment.
Bringing down inflation while preserving a strong labor market will be "very difficult, if not impossible," Daco said, in a note forecasting a recession starting in the fall.
How far beyond neutral will the Fed have to go?
Powell may be pressed on how far beyond neutral the Fed will have to go to get inflation lower.
Scott Anderson, chief economist at Bank of the West, thinks the Fed's tightening path "will remain on auto-pilot" until the economic weakness shows up much more prominently in the U.S. jobs data or the inflation data.
"It feels a bit like one of those bad horror movies where the creepy music is already playing, but the character continues to walk into the seemingly abandoned house. You know this isn't going to end well though you're not yet sure what is about to happen," Anderson wrote, in a note to clients.
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