"While the Fed will probably signal this week that they only expect two rate hikes next year, I think their forecast will be wrong and they will end up raising rates three times", Zandi said. The benefit of that stimulus will likely fade in 2019, slowing growth to a more modest pace.
The Fed's Federal Open Market Committee, the body which sets interest rate policy, will announce its decision at 2 p.m. Wednesday.
In addition, Trump's trade wars, signs China's economy is slowing and the impact of Brexit on an already sluggish European economy add to the sense of global uncertainty that has led stock markets in recent weeks to sell off, wiping out all their gains for the year. The economy ended up with both higher inflation and higher interest rates, and the Fed made a commitment to be politically independent.
"The criticism by the administration of the Fed is not going to stop, and it's likely to intensify", said Joshua Feinman, global chief economist at DWS in NY and a former Fed staff economist.
But it has come under intense pressure from President Donald Trump, who has warned against another hike. The two warned that in conjunction with raising rates, the Fed's balance sheet unwind creates a "double-barreled blitz" of policy impediments that could threaten a USA economy still capable of growth. Economist have pointed to the housing market, trade tensions with China and others, and lower inflation as possible reasons for the Fed to adopt a wait-and-see approach early next year.
In a piece Tuesday titled "Time for a Fed Pause," the Journal urged the Federal Open Market Committee to forgo a rate hike amid a lack of inflation and a possible slowing in US economic growth.
Trump's tweet follows one on Monday slamming the Fed for "even considering" another interest-rate increase, laying out arguments against a hike to savor the achievement of a strong US economy. The Fed has indicated it intends to continue gradually raising rates toward a neutral setting. Even with the increase, rates will remain near their historically low rates. Similar cycles of rate increases previously have resulted in stock-market crashes or economic recessions.
Jerome Powell, the current Federal Reserve chairman, was appointed to his position by Trump.
Trump's combative trade moves against China and other countries have escalated fears that the higher tariffs the United States has imposed and retaliatory tariffs from US trading partners will depress growth in the United States and other major economies.
"We have zero inflation for all practical purposes, so on Wednesday, the only argument I'm hearing for the Fed to raise rates now, is that somehow they have to exert their independence from the White House", Navarro said.
Trump would rather the Fed stop now but his input complicates the situation. The former Hewlett-Packard CEO said Trump's comments are "wholly inappropriate" for any USA president.
On Tuesday, he urged the Fed to consider a Wall Street Journal editorial that argued for a "prudent pause" in rate hikes.