Slowing America’s speedy inflation has been an unexpectedly painless course of to this point. Excessive rates of interest are making it costly to take out a mortgage or borrow to begin a enterprise, however they haven’t slammed the brakes on financial progress or drastically pushed up unemployment.

Nonetheless, value will increase have been hovering round 3.2 p.c for 5 months now. That flatline is stoking questions on whether or not the ultimate part in combating inflation might show harder for the Federal Reserve.

Fed officers may have an opportunity to reply to the newest information on Wednesday, once they conclude a two-day coverage assembly. Central bankers are anticipated to depart rates of interest unchanged, however their contemporary quarterly financial projections might present how the newest financial developments are influencing their view of what number of charge cuts are coming this 12 months and subsequent.

The Fed’s most up-to-date financial estimates, launched in December, advised that Fed officers would make three quarter-point charge cuts by the top of 2024. Since then, the financial system has remained surprisingly robust and inflation, whereas nonetheless down sharply from its 2022 highs, has proved cussed. Some economists suppose it’s attainable that officers might dial again their charge lower expectations, projecting simply two strikes this 12 months.

By leaving charges increased for barely longer, officers might preserve strain on the financial system, guarding in opposition to the danger that inflation would possibly choose again up.

“The Federal Reserve shouldn’t be in a race to chop charges,” mentioned Joseph Davis, Vanguard’s world chief economist, explaining that the financial system has held up higher than could be anticipated if charges have been weighing on progress drastically, and that reducing prematurely dangers permitting inflation to run hotter in 2025. “We’ve a rising likelihood that they don’t lower charges in any respect this 12 months.”

Mr. Davis’s group is an outlier in that regard: Investors more broadly nonetheless see a really small likelihood that the Fed will preserve charges at their present 5.3 p.c by means of 2024.

However markets have been steadily revising what number of charge cuts they anticipate. Traders now guess that central bankers will lower charges thrice by the top of the 12 months, to about 4.6 p.c. Only a month in the past, they anticipated 4 cuts, and noticed an affordable likelihood of 5.

Two huge developments have shifted these views.

Inflation has been firmer than anticipated. The Client Value Index measure got here in above economists’ forecasts in January and February as companies inflation proved cussed and some items, like attire, elevated in value.

Wholesale inflation — which measures the prices of purchases companies make — additionally got here in hotter than anticipated in information launched final week. That issues as a result of it feeds into the Private Consumption Expenditures inflation index, a extra delayed measure however the one which the Fed formally targets in its 2 p.c inflation objective.

Given the info, Fed officers are possible to make use of this assembly to debate “whether or not inflation can proceed to chill,” Diane Swonk, chief economist at KPMG U.S., wrote in a analysis be aware.

“The concern is that the low-hanging fruit related to a therapeutic of provide chains and drop in items costs has been plucked, whereas a flooring could also be forming beneath service sector costs,” she defined.

The second growth is that the financial system nonetheless has numerous momentum. Job features have been strong in February, although the unemployment charge ticked up, and wage growth is decelerating solely slowly. If the financial system retains an excessive amount of vigor, it might preserve the job market tight and preserve wages climbing, which might in flip give corporations an incentive to boost costs. That might make it exhausting for the Fed to wrestle inflation down in an enduring approach.

The Fed doesn’t wish to lower rates of interest prematurely. If the central financial institution fails to wrestle value will increase beneath management rapidly, it might persuade shoppers and companies that inflation is prone to be increased going ahead. That might make it even tougher to stamp out inflation down the street.

On the identical time, the Fed doesn’t wish to go away rates of interest excessive for too lengthy. If it does, it might harm the financial system greater than is critical, costing Individuals jobs and wage features.

Fed officers have been signaling for months that rates of interest are coming down quickly, however they’ve additionally been attempting to maintain their choices open on timing and magnitude.

Jerome H. Powell, the Fed chair, mentioned in a current congressional testimony that it will be applicable to decrease rates of interest when the Fed was assured that inflation had come down sufficient, including, “And we’re not removed from it.”

However a number of of his colleagues have struck a cautious tone.

“At this level, I believe the larger mistake could be to maneuver charges down too quickly or too rapidly with out adequate proof that inflation is on a sustainable and well timed path,” Loretta Mester, the president of the Federal Reserve Financial institution of Cleveland, mentioned in a recent speech. That time has been echoed by different officers, including Christopher Waller, a Fed governor.

Fed officers have one other coverage mission on their plate in March: They’ve signaled that they may focus on their future plans for his or her steadiness sheet of bond holdings. They’ve been shrinking their steadiness sheet by permitting securities to run out with out reinvestment, a course of that takes just a little little bit of vim out of markets and the financial system on the margin.

The Fed’s steadiness sheet grew in the course of the pandemic because it purchased bonds in massive portions, first to calm markets and later to stimulate the financial system. Officers wish to shrink it again to extra regular ranges to keep away from taking part in such a giant position in monetary markets. On the identical time, they wish to keep away from overdoing shrinking their bond holdings a lot that they danger market ruptures.

George Goncalves, head of U.S. Macro Technique at MUFG, mentioned he thought officers would wish to make a plan for slowing steadiness sheet runoff first, then flip to charge cuts. He thinks the primary charge discount might are available in June or July.

Michael Feroli, the chief U.S. economist at J.P. Morgan, expects a charge lower in June — and mentioned he was doubtful of the argument that it might show tougher to complete the job on inflation than it was to begin it. He thinks that cooling labor prices and housing inflation will proceed to sluggish value will increase.

“We could also be getting just a little jumpy,” Mr. Feroli mentioned. The concept the “final mile” can be tougher “has a pleasant rhetorical attraction, however then you definitely form of scratch down, and I haven’t been satisfied.”