Rate hike in the cards at final Fed meeting of 2017

The US central bank holds its final policy meeting of 2017 on Wednesday, with markets overwhelmingly expecting it to announce the third interest rate hike of the year.

The move comes as inflation has begun to show some flickers of life, though likely not enough to extinguish disagreements among Federal Reserve officials about the near-term threat of rising prices.

Fed Chair Janet Yellen is due to hold a press conference after the two-day meeting, which analysts will watch closely for signals on the likely pace of interest rate increases next year.

This will be Yellen's last press conference as President Donald Trump opted to replace her when her term ends in early February.

The Fed debate occurs as Republican lawmakers on Capitol Hill work towards moving a massive tax cut plan over the finish line, which could boost the economy and fuel inflation.

Some economists say a near-term boost from the tax plan could cause the Fed to raise rates even faster than it otherwise might, but they note that central bankers may be hesitant to bake the tax cut plan into their forecasts until a final version is approved.

- Tax cut skepticism -

Many are skeptical that the tax cuts are appropriate in a growing economy.

"Tax cuts should be used when the economy needs tax cuts. It doesn't need tax cuts right now," economist Joel Naroff said in a client note.

"What it does need is tax reform, but there are few people outside the West Wing that are making a strong argument that either bill represents significant tax reform. Instead, it creates risks."

The Fed also is due to release the quarterly economic forecasts. The September forecasts called for three rate hikes in 2018, but that could change that this week.

The Fed's policy-setting Federal Open Market Committee will get another inflation measure to contemplate before making their final decision on the benchmarket lending rate, as the government will release the closely-watched Consumer Price Index for November early Wednesday.

Rising gasoline prices helped drive the Producer Price Index, which tracks the cost of wholesale goods and services, to a five-year high in November, but economists place more stock in other measures of inflation.

The Fed also is due to release the quarterly economic forecasts. The September forecasts called for three rate hikes in 2018, but that could change that this week.