Fed is set to raise rates yet again. After that, then what?

WASHINGTON (AP) — The Federal Reserve is on track to raise its benchmark interest rate for the 10th time on Wednesday, the latest step in its yearlong effort to curb inflation with the fastest pace of hikes in four decades.

Yet economists and Wall Street traders will be more interested in what the Fed and Chair Jerome Powell signal in a statement and at a news conference about a bigger question: What comes next? And on that note, they may be disappointed.

Economists say Powell will likely hint that the Fed is edging closer to a long-awaited pause in its rate increases. Yet he won't necessarily send a clear sign that this week's hike will be the Fed's last. Instead, he will probably stress that further rate hikes could happen if inflation were to stay persistently high, well above the Fed's 2% target rate.

“He wants to kind of tell the market, ‘Don’t relax. Don’t be complacent. We could still hike more if we think we need to, but we don’t know if we have to yet,' ” said Derek Tang, an economist at LHMeyer, an economic consulting firm.

The weekend collapse of First Republic Bank, the second-largest bank failure on record, isn't expected to stop the Fed from proceeding with a rate hike Wednesday. First Republic, the third major bank to fail in the past two months, was seized by regulators on Sunday night and was sold to JPMorgan Chase.

Even if Powell strongly suggests that the Fed will pause its hikes after this week, Tang said, he will likely emphasize that the Fed doesn't expect to cut rates anytime this year. Even so, investors are predicting two Fed rate cuts by year's end, according to CME's Fedwatch tool.

Another quarter-point rate increase on Wednesday would leave...