Lacker said he expects the economy to keep growing at around 2.2% this year, as it has since the end of the recession, and to keep adding jobs. Modest wage growth should help push consumer spending higher, but there is still uncertainty, he said, which could slow the Fed's plan for rate increases .
One big factor is inflation. The FOMC aims for inflation to be about 2%, but falling energy prices and the rising value of the dollar have kept it below that target.
Even stripping out food and energy prices to look at "core" inflation, it is at about 1.33% percent. And "there's no indication that core inflation is going to pick up anytime soon," PNC Financial's Faucher says.
Oil sloshes around
The price of oil is a big factor in keeping inflation low, because it has ripple effects on everything from the price of airline tickets to the cost of shipping goods to stores around the country. The Fed will be keeping tabs on this volatile market.
Oil prices have seen their lowest levels in 12 years, below $30 per barrel in international trading. The sharp drop in the past year is a boon to consumers filling up their gas tanks. Gasoline is averaging less than $2 per gallon nationwide, according to AAA, its lowest price in a decade.
That's encouraging more people to spend money on less-efficient SUVs and pickups; sales of those so-called light trucks rose about 13% last year.
But overall, "a little inflation in the economy is good," Sweet explains. That's because consumers will spend more if they think prices will rise, whereas they're likely to hold off on purchases if prices seem to be falling and there's a better bargain down the road. Gradually increasing prices also encourage businesses to increase wages, he says, "which we desperately need."
The stock market's terrible start to the year, with the Dow Jones industrial average and S&P 500 both approaching the lows seen in August, largely reflected concerns about stalling growth in China, the world's 2nd-largest economy.
"There is a lot of uncertainty in global financial markets right now," Faucher says. That will be another factor in the Fed's decision making. "They certainly don't want to add to the volatility we're seeing in financial markets."
But while the yo-yoing market indexes are on the Fed's radar, they are not likely to be a determining factor for interest rates.
"The last thing they want to start doing is raising the idea that monetary policy is once again going to be driven by equity markets," Naroff says, adding that the frequent fluctuations make the markets an unreliable gauge of the overall economy. "We don't know what the market's going to look like a week from now."
Politics a factor?
The only political polls that really matter this year are nearly here. The 1st votes in the presidential race are set to be cast in the Iowa caucuses on Feb. 1 and in the New Hampshire primaries on Feb. 9.
But even as politicians in both parties campaign on what's wrong with the economy, the Fed is likely to shut out the election-year noise when making its decisions.
"You have a Fed chair who's been arguing to keep politics out of Fed behavior," Naroff says. "If they don't do something they need to do because of politics, then they are admitting that politics has something to do with Fed behavior.
"The reality is, if the Fed needs to do something, they will," he says.
It's just not likely they'll do anything right now.