Thursday's meeting of the Federal Open Market Committee (FOMC), the body within the Federal Reserve that sets monetary policy, is the most anticipated in at least seven years. 
 
 For months now, Fed officials have been hinting to the public that economic conditions have improved to the point that the economy can handle a small increase in interest rates, and that a small increase will be needed to prevent inflation from rising to harmful levels. 
 
 But recent data coming out of China and stock market declines across the globe have called into question just how strong the global economy is. Analysts are even wondering whether the Federal Reserve has the capacity to guide interest rates slowly upwards, or even set rates where it wants them. 
 
 On his blog Tuesday, former Treasury Secretary Larry Summers argue d that the Fed shouldn't raise rates because it would come as a shock to financial markets. He writes: 
 
 Monetary policy should seek to avoid major surprises. Right now the fed funds futures market is assigning only a 28 percent chance to a September tightening. In the last 20 years, the Fed has never tightened without guiding the futures market to at least a 70 percent chance of a tightening . So a move now, given how expectations have been managed, would be an extraordinary shock at a highly uncertain time. 
 
 The last time the Fed moved to raise rates when the markets weren't prepared for the move was back in 1994. Fortune called the subsequent market hysteria the Bond Market Massacre . As Summers describes it, "Over the ensuing nine months, the interest rate on the 10-year bond rose by 2.2 percentage points — nearly twice as big an increase as any subsequently — with mortgage rates rising in tandem. Volatility spiked dramatically across the world , and Orange County, CA, had the then- largest municipal bankruptcy in U.S. history. Mexico and Argentina moved towards financial crisis." 
 
 In other words, the Fed can't simply raise rates unless it's laid the groundwork through effective communication of it's intentions, and in recent weeks, it has not done that. 
 
 Another reason the Fed might not be able to raise rates is that the economic situation of the United States will simply not justify a federal funds rate above near-zero. This is the implication of a recent article in the Wall Street Journal , which showed that more than a dozen central banks have tried raising rates in the past, only to be forced to lower them again as the economies they were supposed to be managing tanked. 
 
 This gets at the central question of whether the Fed should raise rates. Traditional measures of an accelerating recovery, like a falling unemployment rate, say that the answer is yes. But there is also reason to believe that, post-crisis, the new rate of "full employment" is much lower than it used to be. Others argue that fears of rising inflation are overstated, and weakness abroad makes deflation the bigger risk. 
 
 Finally, there is the question of whether the Fed has the technical tools to force interest rates to rise. In normal times, the Fed would control rates by adding or subtracting "reserves" to the banking system. If it wanted to raise rates, it would sell Treasury bills to banks in exchange for these reserves. But after years of quantitative easing, the system has been flooded by reserves, and therefore it must use new and untested tools, like adjusting the interest rates it pays on reserves kept at the bank, or using reverse repo agreements, whereby it sells bonds to a counter party with an agreement to repurchase that same security at a specified price at a specific time in the future. This will, theoretically, enable the Fed to set an interest rate floor, because promise to repurchase a bond the next day at a high enough price will be like setting an overnight interest rate, and be a transaction that bondholders can't afford to forgo. 
 
 Nonetheless, these methods are untested. Janet Yellen is often referred to as the most powerful woman in the global economy, but not even she can override the will of global markets. We may see Thursday just how far her power extends. ||||| The Federal Reserve gave itself room to keep borrowing costs low at least until next year by dropping a linkage between the benchmark interest rate and a specific level of unemployment. 
 
 “We know we’re not close to full employment, not close to an employment level consistent with our mandate, and unless inflation were a significant concern, we wouldn’t dream of raising the federal funds rate target,” Chair Janet Yellen said today after her first time leading a meeting of the Federal Open Market Committee. 
 
 In deciding how long to keep rates low, the committee will look at a “wide range of information,” including labor market conditions, inflation expectations and financial markets, she said. The Fed also reduced the monthly pace of bond purchases by $10 billion, to $55 billion. 
 
 Treasury yields climbed while stocks fell for the first time in three days as Yellen said the central bank’s stimulus program could end this fall and benchmark interest rates could rise six months later. 
 
 Related: U.S. Stocks Fall as Fed Tapers, Forecasts Higher Rates 
 
 The FOMC statement repeated that the federal funds rate will stay low for a “considerable time” after asset purchases end. Asked in the press conference to specify how long that might be, Yellen said: “you know, this is the kind of term it’s hard to define, but, you know, it probably means something on the order of around six months or that type of thing.” 
 
 Photographer: Andrew Harrer/Bloomberg Janet Yellen, chair of the U.S. Federal Reserve, during a news conference following a... Read More Janet Yellen, chair of the U.S. Federal Reserve, during a news conference following a Federal Open Market Committee meeting in Washington, D.C. on March 19, 2014. Close Close Open Photographer: Andrew Harrer/Bloomberg Janet Yellen, chair of the U.S. Federal Reserve, during a news conference following a Federal Open Market Committee meeting in Washington, D.C. on March 19, 2014. 
 
 The 10-year note yield rose 10 basis points, or 0.10 percentage point, to 2.77 percent as of 4:15 p.m. in New York. The Standard & Poor’s 500 Index fell 0.6 percent to 1,860.77. 
 
 Overhauling Guidance 
 
 The Fed is overhauling forward guidance after unemployment declined toward 6.5 percent, its previous threshold for a rate increase, faster than policy makers predicted. Yellen last month told lawmakers that the unemployment rate alone isn’t an adequate gauge of economic health and “there’s a great deal of slack in the labor markets still that we need to work to eliminate.” 
 
 Quarterly forecasts by Fed policy makers also showed more officials predicting the benchmark rate, now close to zero, would rise at least to 1 percent at the end of 2015 and 2.25 percent by the end of the following year. 
 
 Yellen downplayed the importance of the forecasts. 
 
 “These dots are going to move up and down over time,” she said in a reference to the forecasts, which are illustrated as dots on a chart. They moved up “ever so slightly,” she added. “The committee’s views on policy will likely evolve.” 
 
 Photographer: Mark Wilson/Getty Images People visit booths of prospective employers during the Hiring Our Heroes job fair at... Read More People visit booths of prospective employers during the Hiring Our Heroes job fair at the Washington Convention Center, on Jan. 10, 2014 in Washington, DC. Close Close Open Photographer: Mark Wilson/Getty Images People visit booths of prospective employers during the Hiring Our Heroes job fair at the Washington Convention Center, on Jan. 10, 2014 in Washington, DC. 
 
 Measured Steps 
 
 The FOMC repeated that it will reduce asset purchases “in further measured steps at future meetings.” At the same time, “asset purchases are not on a preset course.” The committee announced $10 billion reductions in purchases at the previous two meetings. 
 
 “Growth in economic activity slowed during the winter months, in part reflecting adverse weather conditions,” the Fed said. Even so, “there is sufficient underlying strength in the broader economy to support ongoing improvement in labor-market conditions.” 
 
 The central bank’s preferred gauge of consumer prices climbed 1.2 percent in the year through January and hasn’t exceeded its 2 percent goal since March 2012. That gives policy makers “ample scope to continue to try to promote a return to full employment,” Yellen testified to lawmakers Feb. 27. 
 
 Minneapolis Fed President Narayana Kocherlakota dissented, saying the statement “weakens the credibility of the committee’s commitment to return inflation to the 2 percent target from below and fosters policy uncertainty that hinders economic activity.” 
 
 Economist Survey 
 
 Seventy-six percent of economists in a Bloomberg survey March 14-17 predicted the Fed would drop its unemployment threshold. Economists also predicted a $10 billion reduction in the monthly pace of bond purchases, according to the median of responses. 
 
 Source: FOMC via Bloomberg In deciding how long to keep rates low, the committee will look at a “wide range of... Read More In deciding how long to keep rates low, the committee will look at a “wide range of information,” including labor market conditions, inflation expectations and financial markets, Chair Janet Yellen said. Close Close Open Source: FOMC via Bloomberg In deciding how long to keep rates low, the committee will look at a “wide range of information,” including labor market conditions, inflation expectations and financial markets, Chair Janet Yellen said. 
 
 Yellen, 67, took over as Fed chair last month after three years as deputy to Ben S. Bernanke. In that role, she helped shape the communications policies the Fed wielded as it sought to nurture a recovery from the worst recession since the Great Depression. 
 
 After cutting interest rates to zero in 2008, the Fed embarked on large-scale asset purchases as well as forward guidance intended to convince investors that borrowing costs would stay low for a long time. 
 
 Starting in December 2012, the FOMC said the federal funds rate would stay low at least as long as unemployment was higher than 6.5 percent and the outlook for inflation didn’t exceed 2.5 percent. 
 
 Becoming Obsolete 
 
 With the jobless rate at 6.7 percent last month, that guidance was fast becoming obsolete. 
 
 “It’s a relic of days of yore,” Brian Jacobsen, who helps oversee $241 billion as chief portfolio strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin, said before the FOMC statement. 
 
 Policy makers met this week as economic reports indicated the world’s largest economy is pulling out of a slowdown linked to unusually harsh winter weather. 
 
 Factory production rose in February by the most in six months as assembly lines churned out more cars, business equipment and chemicals, a month after snowstorms hampered deliveries of parts and materials. 
 
 Employers last month added more workers than projected following the weakest two-month hiring gain in more than a year. The jobless rate rose from 6.6 percent, a five-year low, as more people entered the workforce. 
 
 Retail Sales 
 
 Retail sales climbed in February for the first time in three months, claims for unemployment benefits declined and consumer confidence improved, reports showed last week. 
 
 “The economy is getting better, and it’s likely the softer patch we’re seeing is weather related,” Josh Feinman, the New York-based global chief economist for Deutsche Asset & Wealth Management and a former Fed senior economist, said before the statement. “I don’t know that all the headwinds are gone, but they’re clearly blowing with a lot less intensity.” 
 
 Consumers are getting a boost from stock-market gains fueled by the Fed’s unprecedented stimulus. The Standard & Poor’s 500 Index rose yesterday to 1,872.25, near the 1,878.04 record March 7. The S&P jumped 30 percent last year for the best advance since 1997. 
 
 Scaling Back 
 
 As the economy improves, the Fed is slowly scaling back the large-scale bond purchases that have expanded its balance sheet to a record $4.18 trillion. The purchases have prompted concern among some policy makes that the Fed is fueling asset-price bubbles. 
 
 The Fed on Dec. 18 announced its first reduction in bond purchases, to $75 billion from $85 billion, then followed up with an equal cut in January to $65 billion. 
 
 “The task for monetary policy will be to provide continued support as long as necessary, and to return policy to a normal stance over time without sparking inflation or financial instability,” Fed Governor Jerome Powell told lawmakers last week. “This will require a careful balancing, as there are risks from removing monetary accommodation too soon as well as too late.” 
 
 To contact the reporter on this story: Jeff Kearns in Washington at jkearns3@bloomberg.net 
 
 To contact the editors responsible for this story: Chris Wellisz at cwellisz@bloomberg.net Mark Rohner ||||| The U.S. Federal Reserve building in Washington, D.C. EPA/MATTHEW CAVANAUGH 
 
 The Federal Reserve is widely expected to raise its benchmark interest rate this week for the first time in nearly a decade, marking the end of the central bank’s emergency response to the financial crisis but raising new questions about its next steps. 
 
 The Fed dove into uncharted territory in 2008 when it took its target interest rate all the way to zero as the country slid into recession. It experimented with unconventional ways to stimulate the economy, pumping roughly $3.5 trillion into the recovery to boost the flagging economy. 
 
 Fed Chair Janet Yellen solidified expectations of a Fed move in December, but, as has become typical, she left the door open to wait a bit longer. (Reuters) 
 
 Now, financial markets are all but certain that the Fed is ready to start pulling back. Odds of an increase in in the Fed’s target rate when the its top brass meet in Washington this week have topped 80 percent. Fed Chair Janet Yellen said earlier this month that she sees the risks to the Fed’s economic outlook as “very close to balanced” -- which many analysts see as code for a rate hike. The Fed is expected to announce it decision on Wednesday afternoon. 
 
 “With the meeting now just a few days away, we see very little to derail lift off at this point,” Barclays economist Michael Gapen wrote in a client note. 
 
 [A slim majority of Fed officials was open to hiking in September. Yellen tipped the scales.] 
 
 Raising rates, however, is only the first step in getting the economy -- and Fed policy -- back to normal. The process will likely take several years, and there is heated debate over whether the pre-recession standards for a strong economy and appropriate monetary policy are even achievable. 
 
 After deciding to increase rates, the first challenge facing the Fed is exactly how to do it. Historically, the central bank has set a target for the federal funds rate -- the amount that banks charge to lend to each other overnight -- and bought and sold Treasury bonds on the open market to hit that goal. 
 
 But that method will prove too unwieldy now that the Fed has amassed a balance sheet of more than $4 trillion. Instead, the central bank hopes to manage the fed funds rate by changing two other rates: the interest it pays to banks for reserves held at the Fed and the amount it pays other financial institutions, such as money market funds, for short-term trades known as reverse repurchase agreements. The former is expected to act as a ceiling on the fed funds rate; the latter a floor. 
 
 The mechanics are complex, highly technical -- and untested on a broad scale. Still, the Fed has been conducting smaller trials for the past two years and is confident the experiment will work. 
 
 “Monetary policy implementation is just a means to an end,” said Simon Potter, head of the Fed’s open market operations in New York, said in a recent speech. “There is no obvious single ‘right’ way to do it.” 
 
 [Top Fed official: The economy can handle a rate increase] 
 
 Once the Fed achieves liftoff, it will have to decide how long to wait before raising rates again. Officials have emphasized that it will move gradually to test the response of financial markets and the economy, both at home and around the world. The Fed’s fall forecast showed officials expect to push their benchmark interest rate up to a median of 1.4 percent at the end of next year, implying a quarter-percentage point hike at every other time the central bank meets in 2016. 
 
 Investors, however, believe those projections are too optimistic. Financial markets overwhelmingly are betting that the Fed’s rate will be below that at the end of next year. Central bank officials have tried to convince the public that they do not plan on stair-step increases, emphasizing that they can move more quickly or more slowly, depending on the progress of the recovery. 
 
 But the bar for changing course is unclear. Yellen has said she wants to see confirmation that inflation, which has been running below the central bank’s target of 2 percent for several years, is actually picking up. Meanwhile, three other top officials have argued against a rate hike this week and will likely continue to push for concrete evidence of inflation to justify additional rate increases. Others worry the Fed could wind up being overly cautious and not act aggressively enough to rein in an overheating economy. 
 
 “There remains the delicate task of guiding expectations for the future path of rates,” Millan Mulraine, a deputy chief analyst at TD Securities, wrote in a research note before the meeting. “Managing the message will be central to the Fed’s communication effort with the markets.” 
 
 Even with a gradual pace of increases, the Fed’s benchmark rate may not return to its historical long-run average of 4 percent. The Fed’s fall projections fell just shy of that goal at a median of 3.5 percent. Some economists believe that the stopping point could be even lower, due to the double whammy of a slowdown in productivity and a shrinking workforce that have lowered the speed limit for the American economy. 
 
 The Fed also eventually plans to shrink its balance sheet, but it also may not return to its pre-crisis level. In a strategy outlined last year, the Fed committed to maintaining the size of its balance sheet until after the first rate hike. But exactly how long afterward remains up for debate. 
 
 The central bank said it plans to reduce its balance sheet by not replacing assets as they mature, a process known as reinvestment. This month alone, the Fed committed to reinvesting $21 billion. It’s likely the Fed will slowly phase out that process, then allow its portfolio to decline naturally. It has explicitly stated that it does not expect to sell its holdings of mortgage-backed securities. 
 
 Read more: 
 
 What a Fed rate hike could mean to mortgage borrowers 
 
 Have a savings account? Here's what to expect from a Fed rate hike 
 
 Why the U.S. and Europe are taking such a different approach to their economies 
 
 Ralph Nader told Janet Yellen to get advice from her husband. Now she's responded. ||||| Federal Reserve Chair Janet L. Yellen (Saul Loeb/AFP/Getty Images) 
 
 The Federal Reserve raised its benchmark interest rate by a quarter-point Wednesday, the third such increase in six months and a message of confidence in the strengthening of the U.S. economy. 
 
 The increase, which brought the Fed funds rate to between 1 percent and 1.25 percent, was highly anticipated by the markets. On Wednesday morning before the rate increase, Fed futures pointed to a 93.5 percent chance of a rate hike. 
 
 The rate hike "reflects the progress the economy has made and is expected to make toward maximum employment and price stability," Fed Chair Janet Yellen said Wednesday in a press conference. 
 
 The Fed also laid out plans to begin rolling back the more than $4 trillion balance sheet it accumulated in an effort to prop up the economy after the financial crisis. On Wednesday, Yellen said the process was designed to be as predictable and orderly as possible, and that the Fed hoped it would be as exciting as "watching paint dry." 
 
 The increase was the second rate hike this year and the fourth since the Federal Reserve began raising rates in December 2015. As such, consumers will begin to feel the impact of higher costs for lending — especially those with large mortgages or those who carry credit-card debt, said Greg McBride, chief financial analyst at Bankrate. 
 
 “For a lot of people, they don’t even notice,” he said. “But for those where budgets are tight and their debt burdens have been growing the last few years, this is where the signs of strain begin to emerge.” 
 
 The Fed described the rate hike as evidence of a stronger economy. It said that job gains had “moderated” but were still “solid, on average, since the beginning of the year.” As it has in previous months, it said its interest rate remains “accommodative,” meaning that it is still low enough to help fuel economic activity. 
 
 The Fed is mandated by Congress to consider two goals: Maintaining a healthy labor market where Americans who want jobs are able to find them, and restraining potentially destabilizing increases in prices. 
 
 [These banks have been sweetening their savings accounts as the Fed has raised rates] 
 
 The U.S. job market has been growing robustly, and the unemployment rate reached a 16-year low in May. Yet metrics of inflation, including the Fed’s favored measure, have consistently come in below the Fed’s target, convincing some that the Fed should put off future interest rate hikes. 
 
 In its news release Wednesday, the Fed said it expected inflation to remain somewhat below its 2 percent target in the near term but to eventually rise to meet that goal. It added that it was “monitoring inflation developments closely.” 
 
 “The rate hike signals that the Fed believes the economy is improving and is going to be resilient to those hikes,” said Tara Sinclair, a professor at George Washington University and a senior fellow at the jobs website Indeed. 
 
 During the press conference on Wednesday, Yellen argued that a gradual path of rate increases was the best way to avoid a more damaging scenario for the economy. 
 
 "We want to keep the expansion on a sustainable path and avoid the risk that ... we find ourselves in a situation where we've done nothing, and then need to raise the funds rate so rapidly that we risk a recession," she said. "But we are attentive to the fact that inflation is running below our 2 percent objective." 
 
 Board members didn’t alter their projections for the economy and their own actions much compared with what they had expected in March. They continued to predict one more rate increase this year, as well as three rate increases next year. 
 
 Their projections indicate that the Fed expects the economy to grow 2.2 percent in 2017 and 2.1 percent in 2018 -- far below the 3 percent growth that the Trump administration is targeting. Board members did lower their estimates for the unemployment rate and inflation, metrics that have consistently fallen below their expectations. 
 
 The Fed’s decision was nearly unanimous. Eight members of the deciding Federal Open Market Committee voted in favor of the rate increase. Only one, Neel Kashkari, the president of the Minneapolis Federal Reserve, voted against it. 
 
 The Fed also laid out a plan to gradually roll back its balance sheet before the end of the year, a change that many analysts expect could lead longer-term interest rates to rise, potentially raising costs for mortgage holders. 
 
 The Fed currently uses the principal from maturing bonds to buy new ones, but under the new plan, it will gradually phase that out. For Treasury securities, the Fed said it will begin reinvesting only those payments that exceed a cap of $6 billion a month, initially. Then it will lift the cap by $6 billion every three months over a period of a year, until the cap reaches a level of $30 billion per month. 
 
 For agency debt and mortgage-backed securities, the cap will be $4 billion per month initially, rising in steps of $4 billion every three months until it reaches $20 billion per month. 
 
 After that, the Fed plans to hold the caps in place “until the Committee judges that the Federal Reserve is holding no more securities than necessary.” Eventually, it said, the amount will decline to a level below that of recent years, but more than before the financial crisis. 
 
 Madhavi Bokil, a vice president at Moody’s Investor Services, said her group was closely monitoring information about how the Fed will roll down its balance sheet, to analyze what the effect might be on credit conditions. “We think that if the same gradual approach is followed, then any potential negative spillover would be limited,” she said. 
 
 Yellen said Wednesday that she would welcome the Trump administration's new appointments to the Federal Reserve board, and that she had not personally spoken with President Trump about her reappointment. 
 
 The Trump administration will have the opportunity to dramatically reshape the Fed through appointments. The Fed’s Board of Governors has three unfilled positions, and Yellen’s term as Fed chair and Stanley Fischer’s term as Fed vice chair expire early next year. Although Trump criticized Yellen during the campaign for holding rates low to benefit the Obama administration -- charges she denied -- since his inauguration he has suggested he may be open to reappointing her. 
 
 White House officials are reportedly close to nominating several people to fill vacant spots on the board, including former Treasury Department staffer Randy Quarles and economics professor Marvin Goodfriend. 
 
 On Wednesday, more than 30 House Democrats, including Rep. Rosa DeLauro (D.-Conn.) and Rep. John Conyers, Jr. (D.-Mich.) sent a letter to the White House criticizing some of the rumored choices for appointments to the Fed, in particular Goodfriend. 
 
 “It is disturbing that you are reportedly considering prospective Board of Governor nominees who have suggested narrowing or eliminating the Fed’s full employment mandate, or undermining the Fed’s ability to achieve full employment by requiring that the Fed adopt constraining, rules-based monetary policy,” the letter read. 
 
 See also: 
 
 Fed forecasts rate hike ‘soon,’ details plan to trim balance sheet 
 
 Federal Reserve likely to begin cutting back $4.5 trillion balance sheet this year 
 
 The 6 million people the White House believes can balance its budget ||||| Federal Reserve The brain trust at the Federal Reserve plans to go even more slowly when the bank begins to raise interest rates. 
 
 WASHINGTON (MarketWatch)—The Federal Reserve edged closer to its first rate hike since 2006, but key officials also indicated Wednesday they will raise interest rates far more slowly than they foresaw just a few months ago because of a softening in the U.S. economy. 
 
 In a unanimous vote, the Fed as expected dropped its pledge to remain “patient” about raising rates in a statement released after a two-day meeting. And 15 of the bank’s top 17 officials think the Fed will raise rates sometime this year. See text of statement. 
 
 Still, the Fed cautioned that it will wait to raise rates until it has “seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2% objective over the medium term.” 
 
 Stocks vaulted after the statement, with the Dow Jones Industrial Average DJIA, -0.03% reaching triple-digit gains. Economists say the Fed’s shift suggests the first rate hike probably won’t take place until September instead of June. 
 
 Also see: Live blog and video of Fed decision and Yellen news conference 
 
 The central bank’s go-slow approach appears to have hardened after an apparent slowdown in economic growth in early 2015. In a news conference, Chairwoman Janet Yellen said the economy is showing progress in many areas but that many top Fed officials saw “more slack in the economy now than they previously did.” 
 
 As a result, the Fed cut its forecast for U.S. growth in 2015 to a range of 2.3% to 2.7% from an earlier forecast of as high as 3%. 
 
 With the economy seeming somewhat unsettled, at least temporarily, the Fed chairwoman effectively ruled out a rate increase in April and perhaps longer. Just because the bank dropping the word patient, Yellen stressed, doesn’t mean the Fed is suddenly “impatient” to act. 
 
 In a dovish signal, Fed officials sharply reduced their expected path of interest rates this year and next. 
 
 According to the “dot plot” that tracks where the 17 Fed officials think the target fed funds rate will be at the end of the year, the median “dot” fell from 1.125% in December to 0.625% at this meeting. The median dot for 2016 also moved down, to 1.875% in March from 2.5% in December. 
 
 While dropping its “patient” approach unties the Fed’s hands, the central bank still wants to be sure the economy is strong enough to handle a series of rate increases. 
 
 Complicating matters are a spate of recent data such as retail sales, home construction and industrial production that suggest U.S. growth has flagged in early 2015. Many economists have cut their forecasts for the first quarter. 
 
 The Fed is also wary of the soaring value of the dollar, which has made U.S. goods and services more expensive in other countries. If the bank starts to raise rates soon, that could further hurt American exporters by strengthening the dollar at a time when many other large countries are cutting their rates and seeing the value of their own currencies fall. 
 
 Communicating its message to Wall Street in a way that doesn’t alarm investors is another tricky challenge. The Fed wants to avoid a repeat of the so-called taper tantrum that took place in mid-2013 after former Chairman Ben Bernanke suggested that the end of a bond-buying economic-stimulus strategy was near. Stocks gyrated sharply and interest rates unexpectedly shot higher, briefly disrupting the economy. 
 
 The central bank pushed its benchmark fed funds rate to zero in 2008 and has held them there ever since in an effort to stoke economic growth following the worst recession since the 1930s. 
 
 Last October, the Fed ended a bond-buying binge in which it stuffed its balance sheet with nearly $4 trillion in Treasurys and mortgage-back securities, a strategy aimed at keeping interest rates low. Many loans to buy goods such as houses and cars are tied to the fed fund rate and it affects the price of virtually every financial asset, including stocks and bonds. 
 
 With rates expected to rise over the next few years, Yellen and company hope to ensure the process is as orderly as possible and doesn’t spook markets into the sort of negative reaction that could blunt the economy’s progress. 
 
 Minutes of the policy meeting will be released on April 8. ||||| WASHINGTON (Reuters) - Market volatility is low, U.S. census data shows income gains have reached the middle class, and workers are clawing back a larger share of national income. For now, at least, no international risk stands out and inflation may even be picking up. 
 
 If Fed Chair Janet Yellen wants to prove that policymakers are not being pulled along by investors who for years have second-guessed them, this week may offer a rare moment of calm to do so. 
 
 The Fed is divided enough ahead of its Sept. 20-21 rate meeting that a nudge from its most influential policymaker could make the difference, and even some investors have begun to argue it is time for the central bank to stop worrying so much about what markets expect. 
 
 “Let’s get on with it already,” said Michael Arone, chief investment strategist at State Street Global Advisors. 
 
 “It will cause some challenges to the market but I think that is healthy in context of a normal business cycle,” Arone said. “It will increase the cost of capital, and flush out some riskier assets in the short term. But that is probably the right thing to do.” 
 
 A Reuters poll last week suggested it is a very long shot. 
 
 The poll showed the median probability of a rate rise provided by economists was about one-in-four and only 6 percent of those surveyed expected the Fed to act, with the majority expecting the Fed to wait until December. 
 
 Fed funds futures trading shows that investors are even more skeptical than that, and expect the Fed to stay put until February - more than a year after the central bank raised rates and signaled more would come this year and next. 
 
 Instead the central bank has been stuck at the 0.25 to 0.5 percent range set last December when it lifted rates for the first time in a decade. 
 
 U.S. Federal Reserve Chair Janet Yellen speaks during a news conference following the two-day Federal Open Market Committee (FOMC) policy meeting in Washington, DC, U.S. on March 16, 2016. REUTERS/Kevin Lamarque/File Photo 
 
 DOUBTS OVER ECONOMY, OR YELLEN? 
 
 Many investors, economists, activists, and some policymakers say the economy is still not ready for higher rates. 
 
 The receding rate rise expectations may reflect such concerns about the U.S. economic recovery. They may also reflect doubts, however, about Yellen’s message that the case for a rate increase is growing stronger. 
 
 Such skepticism about the Fed’s plans to end policy calibrated to fight a financial crisis and recession forces officials to perform a difficult balancing act. 
 
 The deeper investors discount the likelihood of Fed action, the greater the risk any move will trigger an overreaction with unpredictable and negative economic fallout, making policymakers more hesitant to act. 
 
 It is a cycle that may require taking a calculated risk to break, officials say. 
 
 “We are in a minuet with markets and cannot ignore how markets are pricing,” Atlanta Fed president Dennis Lockhart said last week, before the Fed’s blackout period for public comments. 
 
 The Fed has been caught in that dance for five years now. While at the beginning of 2011 trading in euro-dollar futures was still foreseeing a return to typical interest rates over the next few years, that view has given way to expectations that rates will remain low for a decade to come. (Graphic:tmsnrt.rs/2cyyvd1) 
 
 Those expectations have become deeply anchored and, some argue, encouraged by the Fed’s reluctance to increase rates even as the economy has approached its employment and inflation targets. 
 
 Slideshow (2 Images) 
 
 Analysts who follow the Fed complain that its framework has become confusing: low unemployment and inflation close to the 2 percent target would not seem consistent with a policy rate more aligned to a recession. 
 
 CACOPHONY 
 
 The assorted views of regional bank presidents and board members in recent weeks muddy the waters further. They have ranged from warnings of runaway inflation to suggestions the Fed should increase its inflation target because prices are so weak. 
 
 Thrown into the mix as well have been calls for a full-blown policy overhaul, and a suspicion that the economy may be stuck in a rut with little anyone can do about it. 
 
 Among that chorus of voices, Lael Brainard, a former Obama administration official and since June 2014 a Fed governor, has become a central figure in shaping the image of a Fed that errs on the side of caution when interpreting data and events. 
 
 Since the rate debate intensified last year, Brainard has spoken ahead of five out of the six key policy meetings, laying out her view that the U.S. recovery could not be taken for granted in a world of potentially perpetual economic weakness. The quarterly meetings that end with a news conference are considered the most likely sessions for Fed action. 
 
 She repeated that line last week and called for “prudence,” effectively stamping out any rate rise speculation.. 
 
 Brainard’s argument seemed prescient last summer when she presented it the first time. The following 12 months brought market volatility linked to China’s economic weakness and later concerns about the fallout from Britain’s vote to leave the European Union. The turmoil weighed on the Fed’s outlook for the U.S. economy. 
 
 Things have since calmed, and through it all the U.S. economy has continued to generate jobs. Equity markets are up so far this year, while volatility in the U.S. bond market is near its lowest level since late 2014. 
 
 To be sure, a Bank of America Merrill Lynch measure on expected swings in the bond market in three months .MERMOVE3M did pick up after the European Central Bank refrained from extending its 1 trillion plus euro bond purchase program. Uncertainty about Bank of Japan policy, and possible swings in the dollar that could hurt U.S. manufacturers, remains a risk. 
 
 But to some, those risks have become less important than the uncertainty stemming from the Fed itself. 
 
 JP Morgan (JPM.N) chief executive Jamie Dimon said last week it was the right time for the Fed to move, a call echoed by the country’s credit union sector. 
 
 “Folks in the credit union world - the majority want the Federal Reserve to raise interest rates,” said Steve Rick, chief economist for CUNA Mutual Group, an insurer and financial company whose products are sold through credit unions. 
 
 “A quarter point is not going to kill the economy at all. But you would have banks more willing and credit unions more willing to lend if they believe interest rates were giving a clear signal,” Rick said. ||||| If the Federal Reserve doesn't raise interest rates in December, it wouldn't be the first time this year it's faked us out. 
 
 Fed officials are widely expected to boost the benchmark federal-funds rate on Wednesday for the first time in nearly a decade. According to a Wall Street Journal survey, 97% of business and academic economists expect an increase to happen. 
 
 But don't count your interest rate chickens before they hatch: in August, a similar WSJ survey had 82% of respondents predicting a rate hike in September, and we all know what happened with that. 
 
 The Fed has balked on a rate boost all year, leaving plenty of anticipatory forecasters, journalists and traders looking like Miss Cleo. 
 
 "Traders bet the Fed will start raising rates next July," read the headline of a Reuters piece published last December, citing a strong jobs report. At the time, rate-futures contracts showed traders perceiving a 53% likelihood of the first hike to come mid-year. 
 
 The February jobs report sparked rate hike speculation as well -- and a strong market reaction. The Dow Jones Industrial Average tumbled 270 points the day workforce numbers were released on fear of a Fed rate increase. 
 
 In March, a Reuters poll had about half of a group of 70 economists anticipating an increase in June, and a WSJ survey had similar findings, with about half of respondents predicting a mid-year rate hike (the other half bet on September). 
 
 "The Fed is going to raise rates in June," Business Insider declared. 
 
 The summer came and went, and still no rate hike. 
 
 "The problem in June was that there was a significant scare in Europe...so the Fed postponed, they chose not to act as a precaution, to be on the safe side," said Bernie Baumohl, chief global economist at the Economic Outlook Group, a forecasting advisory services company. 
 
 "Many participants expressed concern that a failure of Greece and its official creditors to resolve their differences could result in disruptions in the financial markets in the euro era, with possible spillover effects on the United States," the FOMC's June meeting minutes read. They also note that "some participants reiterated the importance of effective Committee communications in reducing the likelihood of an outsized financial market reaction around the time that policy normalization begins." 
 
 Fed Chair Janet Yellen said at a news conference after the June meeting that "it would be wrong" to provide a road map on rate increase timing, but many set their sights on a hike in September. 
 
 "Fed will raise rates in September," read a MarketWatch headline in July. A mid-August Bankrate survey of economists found two-thirds of respondents anticipated a September rate hike, and the aforementioned WSJ poll had even more predicting an increase. 
 
 But when market turmoil hit in August, spurred in part by China's surprise currency devaluation, doubts about what weeks before appeared all but inevitable began to seep in. 
 
 New York Fed President William Dudley said the prospect of a September rate hike "seems less compelling," and the proportion of economists in that Bankrate survey predicting an increase dropped to 40%. 
 
 Still, some stuck to their bets.
– Will interest rates finally go up? Federal Reserve officials begin a two-day meeting today, with the financial world waiting with bated breath on Janet Yellen's subsequent announcement. "Anyone who uses money" will ultimately be affected, observes NPR, which offers a primer here. Other highlights in coverage: 'Nail-biter': This one is tough to predict, with some members of the Federal Open Market Committee that is meeting open to a hike and others opposed. "Officials could seek some middle ground, such as holding rates near zero while sending a signal that a rate increase is likely at the Fed’s Oct. 27-28 or Dec. 15-16 policy meetings," notes the Wall Street Journal. "Given the uncertainty, how Ms. Yellen frames what the Fed is doing will be as important as what the Fed actually does." A more important question: Everyone's asking will the Fed raise rates, "but there’s another important consideration that isn’t asked nearly enough: Can the Fed raise interest rates?" writes Matt Phillips at Quartz. Things have gotten far more complicated since the last bump nine years ago, and the Fed's real challenge is to show "it still has the market muscle and technical know-how to get rates up and keep them there." 'Untested tools': "In normal times, the Fed would control rates by adding or subtracting 'reserves' to the banking system," notes Fortune. "If it wanted to raise rates, it would sell Treasury bills to banks in exchange for these reserves. But after years of quantitative easing, the system has been flooded by reserves, and therefore it must use new and untested tools" to get the job done. A firm no: "Monetary policy should seek to avoid major surprises," writes former Treasury Secretary Larry Summers at his blog. "Right now the fed funds futures market is assigning only a 28% chance to a September tightening. In the last 20 years, the Fed has never tightened without guiding the futures market to at least a 70% chance of a tightening. So a move now, given how expectations have been managed, would be an extraordinary shock at a highly uncertain time." A firm yes: It's time to "return to basics," writes Brad Brooks at Bloomberg View. "The Fed should raise rates 0.25% this September and 0.50% thereafter. Already this century, the Fed has helped enable two bubbles that resulted in equity corrections of 40% and 50%. Investors would be wise to remember that if the Fed doesn't raise rates now." Reading the dots: The key to the Fed's move may be found in something called a "dot plot" of interest rate projections. Bloomberg has a primer.