If Anything Can Shake the Fed’s 2017 Rate Path, It’s These Risks

The Federal Reserve is expected to leave policy untouched this week, a moment of calm in what could shape up to be the central bank's most active year of tightening in a decade.

Policy makers expect to raise rates twice more for a grand total of three 2017 increases, more hikes than they'd made in the previous 10 years combined. They also hope to release a plan for running off their $4.5 trillion balance sheet and possibly begin that process before the end of 2017.

Despite that active outlook, economists expect the Federal Open Market Committee to leave policy unchanged at the two-day meeting while making only minor tweaks to their policy statement, possibly to acknowledge weaker first quarter growth. Their decision will be published at 2 p.m. on Wednesday. They will probably leave open the possibility for a June rate increase without cementing it.

This month will probably mark a temporary pause in a gradual hiking path, but the Fed operates in a world of uncertainties and there's plenty that could slow the central bank — or speed it up — as the year progresses. Here are developments to watch.

The Fed has dual goals of full employment and steady inflation around 2 percent, and it's roughly on track in both departments. Headline inflation stood at 1.8 percent in March while the core measure, which excludes food and energy costs, was 1.6 percent. In March, Fed officials projected that those gauges would each reach 1.9 percent on average in the fourth quarter. Unemployment is 4.5 percent, which is already in line with the level that most policy makers view as consistent with a healthy job market.