WASHINGTON, Sept 19 (Reuters) - The U.S. Federal Reserve kicks off a two-day policy meeting on Tuesday with officials widely expected to keep interest rates on hold for now, but also flagging in new economic projections whether they feel rates still need to rise further before the end of the year.A new policy statement and interest rate decision will be released at 2 p.m. EDT (1800 GMT) on Wednesday, with Fed Chair Jerome Powell scheduled to hold a press conference at 2:30 p.m. to elaborate.Investors in contracts tied to the federal funds rate consider it a near certainty the U.S. central bank will leave the benchmark federal funds rate at the current range of between 5.25% and 5.5%, a step consistent with the Fed’s shift to a slower and more considered pace of rate increases.From March 2022 through May 2023 the Fed raised rates at 10 successive meetings – by anywhere from a quarter to three quarters of a point – as it fought the worst rise of inflation since the early 1980s.Reuters Graphics Reuters GraphicsIn June the Fed paused, but the quarterly economic projections accompanying that decision showed 12 of 18 policymakers still anticipated two more quarter-point rate increases by the end of the year.One of those came at the July meeting. While the Fed’s slower, “data dependent” pacing may lead officials to skip over September, analysts say there has been little in recent economic news that would prompt policymakers to take that last rate increase off the table.The logic “is partly inertia, as Committee participants might not want to mess with what’s working,” said JP Morgan economist Michael Feroli.Additionally, data since the Fed’s last meeting, while generally supporting the view of slowing inflation alongside continued economic growth, has been somewhat mixed as the pace of headline price increases recently jumped.As of the July meeting “it was still the case…that ‘most participants continued to see significant upside risks to inflation,'” Feroli said, quoting from the minutes of that meeting. While inflation has slowed from its peak last year, underlying measures show prices still rising at about double the Fed’s 2% target.Reuters Graphics Reuters Graphics’RISKS ARE SKEWED’Policymakers, and notably Powell, have also been reluctant to show any give in their inflation fight, even if it means higher interest rates than expected and greater risk to an economy that has produced more jobs and growth than anticipated given the rapid tightening of monetary policy.A higher Fed rate leads banks and financial firms to raise their own rates as well for things like home mortgages, business loans, credit cards and a variety of other types of financing – discouraging investment and household spending and, through that drop in demand, lowering inflation.Closing the door on further rate increases now could lead overall financial conditions to loosen as markets price for a lower rate trajectory, the opposite of what the Fed would want while it remains…
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