The US Federal Reserve is set to conclude the year with two high-stakes meetings as it prepares to hold rates on Wednesday and defer any further tightening amid mixed signals from the world’s largest economy.

The Federal Open Market Committee is widely expected on Wednesday to keep its benchmark interest rate at a 22-year high, giving the central bank more time to judge progress in pushing inflation back down to its 2 per cent target.

The move marks the clearest sign yet that officials think the risks confronting the US economy have become more complex, and sets up a fraught few months as they measure the impact from a campaign of raising interest rates that has already begun to crimp activity.

Do too little at this stage to combat price pressures and high inflation could become entrenched. Do too much and put hard-won job gains in peril.

“A year ago we were in a situation that was in one dimension completely clear. It was obvious that they needed to move the policy rate up and they needed to do it aggressively,” said David Wilcox, who led the research and statistics division at the Fed until 2018. “Today we are in a different situation where it is a much closer call whether they have done enough.”

Even officials who fretted about containing inflation have grown concerned about monetary policy becoming too tight — a development that will complicate future decisions and make the next Fed rate-setting meeting beginning October 31 a cliffhanger.

While market participants broadly believe the Fed will hold interest rates at the current 5.25 to 5.5 per cent level until well into 2024, nearly half of leading academic economists recently polled by the Financial Times expect the Fed to increase by another quarter-point, while more than 40 per cent predicted two or more increases of that size.

With hawkish Fed officials keeping the door ajar to higher borrowing costs — even as they endorse a slower pace of tightening amid signs of labour market softening — economists are left with a tricky question: what will prompt the central bank to tighten the monetary screws again?

One factor is the US consumer, whose spending has defied expectations of a more pronounced slowdown — a surprising resilience that could keep prices elevated. Fed chair Jay Powell homed in on this last month at the central bank’s symposium in Jackson Hole, Wyoming.

“I think they still have another hike in them at some point, just because there is still more momentum in underlying inflation than we expected at this point in the cycle,” said Kristin Forbes, a former Bank of England official who now teaches at the Massachusetts Institute for Technology.

Other economists argue that it will take a reacceleration of consumer spending, not just continued resilience, to push the Fed to restrain demand further.

Forbes, like most of the economists recently surveyed by the FT, is also concerned about fast-rising oil and fuel prices.

Central bankers typically look through such commodity price gyrations, and some economists argue that higher petrol prices will deter consumer spending elsewhere. But “after you’ve been through a period of volatility and high inflation like this, you have to be more sensitive to these shocks”, Forbes said.

Other curveballs complicating the Fed’s decision-making process and adding to a choppy inflation outlook include the autoworkers’ strike in the Midwest, the possibility of a government shutdown by month-end, and the resumption of student-loan repayments in October.

“We should expect some bumpiness on the inflation path, so the key is how the Fed is filtering the incoming data and how it affects their 2024 inflation forecast,” said Brian Sack, a former head of the New York Fed’s Markets Group. “At this point, I don’t think we have seen anything that suggests a sizeable revision to that.”

Rising short- and long-term Treasury yields alongside a broader tightening of financial conditions will also aid in the Fed’s efforts to combat inflation, he added.

Even if the FOMC is leaning towards no further policy action this year, economists believe Powell will be loath to rule it out.

“The last thing in the world he wants is to create a sense of clarity or certainty that they’re done,” said Wilcox, who now works at the Peterson Institute for International Economics and Bloomberg Economics.

The Fed on Wednesday will also publish a new set of economic projections, including a revised “dot plot” aggregating individual officials’ predictions of the fed funds rate.

Forecasts for year-end growth are expected to be revised higher too, even as those for inflation — minus volatile food and energy prices — are lowered. The dot plot is expected to show officials’ support for one more quarter-point rate rise this year, with some economists thinking it could also show fewer rate cuts in 2024 as the Fed recommits to keeping interest rates higher for longer.

“Although things are going in the right direction, they do have to be on guard about anything that could begin to lift inflation expectations,” said Peter Hooper, a Fed veteran now at Deutsche Bank.

“They fully recognise that to finish the job they have to stay on message until they get somewhat closer.”