Federal Reserve Chair Janet Yellen testified on Capitol Hill on Dec. 3 before the Joint Economic Committee. (AP Photo/Jacquelyn Martin)

The blizzard that pummeled the Washington region won't keep the Federal Reserve from holding its regularly scheduled meeting Tuesday and Wednesday. But the tempest in global financial markets could induce considerably more grief.

Just six weeks ago, the nation’s central bank announced it was beginning to withdraw its support for the U.S. economy by hiking interest rates for the first time in nearly a decade. Fed Chair Janet Yellen said the move was a sign of confidence in the recovery, and officials expected to continue raising rates throughout the year as the economy strengthened.

Yellen has repeatedly emphasized that the central bank intends to move gradually, a pace that Fed forecasts suggest is equivalent to just four rate increases this year. But even that timeline is couched in caveats: If the recovery progresses more quickly than expected, the Fed might move faster. But if the economy stumbles, the central bank’s “gradual” pace may very well turn glacial.

Markets are betting on the latter. Wall Street has suffered its worst-ever start to a year amid gnawing fears over China’s slowdown and diminished expectations for global economic growth. A month ago, the odds that the Fed would hike again by March was essentially a coin toss. Now, investors believe there’s less than a 1-in-3 chance the central bank will move this spring, according to an analysis by CME Group. The likelihood that the Fed will raise rates four times this year has dropped to just 8 percent.

“Renewed volatility in global financial markets has the potential to spook [Fed] members again,” said Kim Chase, senior economist at BBVA, which anticipates only two rate hikes this year.

Central banking is a long game. The Fed’s decisions take months -- even years -- to influence the economy. That’s why officials insist that they do not react to every hiccup in the markets. In a speech about a week ago, New York Fed President William C. Dudley said his outlook for the economy “has not changed much” despite the volatility on Wall Street. Though some data have been weaker than anticipated, the job market has been stronger, he said.

“We expect that the normalization of monetary policy will be quite gradual,” Dudley said. “But, there is no commitment here. The flow of the data—broadly defined―will drive our actions as it influences our assessment of the economic outlook.”

In other words, no change in the outlook means no change in the plan to keep raising rates. At least so far.

The dilemma facing the Fed is determining whether the turmoil in markets signals deeper problems in the global economy that could infect the homeland. It’s a challenge that the European Central Bank is also wrestling with. ECB President Mario Draghi said last week that the risks to the region’s health have grown -- and signaled that the ECB was ready to provide even more support to the economy.

“We have the power, the willingness and the determination to act,” he said. “There are no limits to how far we are willing to deploy our instruments.”

In addition, the volatility itself could become a headwind. An analysis by Morgan Stanley calculated that the recent market turbulence was equivalent to four rate hikes by the Fed, shaving 0.2 percentage points off economic growth this year.

The Fed has been trying for the past three years to pave the way for a graceful exit from this unprecedented era of easy money, yet the road remains plagued by potholes. The first suggestion in 2013 that the central bank was considering pulling back its support sent markets for a tailspin. The episode, which became known as the “taper tantrum,” caused mortgage rates to spike, threatening the still-fragile housing market and forcing the Fed to delay the end of quantitative easing, a key stimulus program.

The central bank followed a similar pattern last fall after China fears drove dramatic declines in global markets, punctuated by a 1,000-point drop in the Dow Jones Industrial Average. Investors had expected the Fed to begin raising rates in September, but officials opted to wait until December to gain time to assess the fallout.

Yet that doesn’t mean the Fed blinks every time the market shudders. In January 2014, investors were focused on emerging markets as Turkey’s currency plunged to record lows. The Standard & Poor’s 500-stock index suffered its worst week in about a year. The U.S. economy was shrinking, and job growth was anemic.

Then-Fed Chairman Ben S. Bernanke had just announced the central bank would phase out quantitative easing over the course of the year. Many wondered whether the deluge of dour news would change his mind. It didn’t.

The Fed’s meeting this week is not expected to produce any major announcements. Instead, investors will be parsing the central bank’s official statement for hints about how worried the Fed is about the market turmoil and any updates to the economic outlook. Every sentence will be scrutinized, and each word choice analyzed. And even if no changes are detected -- well, sometimes that is the biggest clue of all.

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