Dec. 16--All systems appear to be go for the long-awaited liftoff of the Federal Reserve's benchmark short-term interest rate on Wednesday.
Now the question is: How fast and far will the rate-hike rocket travel?
The Fed is expected to gradually nudge up the rate -- 0.25 percentage points at a time -- from the near-zero level where it has been grounded for seven years.
"We have the same Fed funds rate today as we did during the depths of the recession and the financial crisis," said Greg McBride, chief financial economist at Bankrate.com, a financial information website.
"The economy is significantly healthier so we don't need the stimulus of 0% rates anymore, and the Fed is just going to tip-toe their way out of that," he said.
Fed policymakers will give some indications of where the so-called federal funds rate is headed in a short, written statement and new economic projections to be released at 11 a.m. Pacific time.
But the real job of setting expectations, particularly for financial markets, will fall to Fed Chairwoman Janet L. Yellen when she meets with reporters for an hourlong news conference at 11:30 a.m. Pacific time.
Here are five things to watch for as the Fed readies for the first rate increase in nearly a decade.
One small step for the economy ... and then what?
Yellen and other Fed officials have sent strong signals for weeks that they would raise the rate at this week's policymaking meeting, so most analysts and investors would be shocked if that doesn't happen.
And when analysts and investors are shocked, market turmoil usually follows.
So there's little doubt the Fed will inch the rate up Wednesday.
But what will the policy statement and Yellen say to set expectations for the next rate increase?
In the past, the Fed has raised the rate after nearly every one of its eight annual meetings, once it launched into a rate-hike cycle.
This time, however, the rate is starting from an unprecedented low. And the recovery has been stubbornly slow.
Policymakers don't want to move too quickly out of fear they will damage the economy, which still is struggling to produce the necessary wage and inflation growth.
"Rates will stay low for a long time," Yellen assured lawmakers during a hearing this month. Expect her to say something similar at her Wednesday news conference.
Fed officials probably will be as vague as possible about when they might act next so they can watch the economic data and gauge the effects of the increase.
They next meet in January, and that could be too soon for another rate hike.
Analysts are focusing on the meeting after that, in March, when Yellen will hold her next quarterly news conference and would be able to explain another rate nudge.
Connecting the dots
Along with the quarterly economic projections, Fed policymakers will release a chart known as the dot plot. Each of them places dots on a graph to illustrate where they anticipate the interest rate will be at the end of the next four years and in the longer run.
