A high-stakes inflation report due Thursday is expected to show that price pressures within the economy remained uncomfortably high in September.
Economists expect the consumer price index, which measures a range of goods that include gasoline, health care, groceries and rent, to show that monthly prices rose 3.6% in September, just below the 3.7% increase recorded the previous month.
On a monthly basis, inflation is seen rising 0.3%. That's about half of the increase in August, reflecting a less steep climb in gasoline prices.
"Inflation has come off of full boil, but it is still too hot to handle," said Mark Hamrick, senior economic analyst at Bankrate. "For consumers trying to manage their personal finances amid inflation, the situation with prices is a bit like battling illness. Being past the worst of it isn’t the same as feeling better or robust."
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Other parts of the report are also expected to point to a slow retreat for inflation, a worrisome sign for the Federal Reserve. Core prices, which exclude the more volatile measurements of food and energy, are expected to climb 0.3%, or 4.1% annually, suggesting that underlying price pressures remain strong.
The Fed's target inflation rate is 2%.
The central bank is closely watching the report for evidence inflation is finally subsiding as policymakers try to cool the economy with a series of aggressive interest rate hikes. Officials have approved 11 rate increases in a span of just 16 months, lifting the benchmark federal funds rate from nearly zero to the highest level since 2001.
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Although policymakers skipped a rate hike at their most recent September meeting, they opened the door to another increase this year, depending on forthcoming economic data.
In addition to inflation, central bank officials are taking into consideration job growth and consumer inflation expectations.
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However, in recent days, many Fed officials have suggested they could be done raising rates thanks to the recent run-up in long-term Treasury yields, which influence financing costs for households and businesses.
"If long-term interest rates remain elevated because of higher term premiums, there may be less need to raise the fed-funds rate," Dallas Fed President Lorie Logan, a voting member of the FOMC, said Monday.
