washington feb 1 reuters  the federal reserve is expected to raise its target interest rate by a quarter of a percentage point on wednesday setting aside the rapid hikes used last year to curb a surge in inflation in favor of a more stepwise hunt for a stopping point the expected increase would set the us central banks benchmark overnight interest rate in the 450475 range the highest since november 2007 when the economy was on the eve of what would prove to be a long and deep recession policymakers hope to avoid that sort of outcome this time and economic data since their last policy meeting in december generally has moved in the right direction inflation is slowing under the impact of higher interest rates and tighter financial conditions while the economy continues to grow and create jobs the ratesetting federal open market committee is due to release its policy statement at 2 pm est 1900 gmt fed chair jerome powell is scheduled to hold a news conference half an hour later to elaborate on the decision recent events suggest that the coming year may be a notch less challenging than previously thought nathan sheets chief global economist at citi wrote this week noting that recession risks were easing on a global basis while us data pointed to continued growth moderating inflation and a slower pace of fed rate hikes ahead of the feds twoday meeting this week the international monetary fund increased its outlook for a global economy that its officials said had proved surprisingly resilient in the face of monetary policy tightening and the ongoing war between russia and ukraine caught flatfooted last year as inflation accelerated and threatened to prove far more persistent than anticipated the fed approved the fastest interest rate hikes since the 1980s starting with a quarterpercentagepoint increase in march the central bank by the summer was raising rates in increments of three quarters of a percentage point and all told moved the target policy rate up by 425 percentage points in just 10 months it delivered a halfpercentagepoint hike at its dec 1314 policy meeting the impact of the policy moves seems to be gaining steam new data last week showed a key inflation measure slowed faster than expected in december continuing a sixmonth downward trend growth in employment costs closely watched as a possible indicator of future price increases also slowed in the fourth quarter but the feds preferred measure of inflation the personal consumption expenditures price index still rose at a 5 annual rate in december down from a june high of nearly 7 but still more than double the central banks 2 inflation target policymakers are adamant they will not make what they consider to be the crucial error of pausing further rate hikes until they are convinced inflation is on a durable path back to the 2 goal some analysts do expect the fed to remove from its policy statement the current openended promise of ongoing increases in interest rates a phrase used since the central bank began its tightening cycle in march any new language however would still leave the door open for further increases depending on incoming economic data particularly on inflation and jobs the expected move to 25basispoint rate increases will be a hawkish downshift bnp paribas economists wrote ahead of this weeks policy meeting while we expect the fed to downshift the pace of tightening to 25bp increments  we also anticipate a hawkish resolve  policymakers are encouraged by recent developments but appear to remain united in the need to keep at it with respect to reducing inflation pressures the feds meeting this week its first of 2023 will not include new economic forecasts from policymakers the most explicit way for them to signal where rates may be headed this year as of december policymakers median forecast was for the feds target interest rate to peak in a range between 500 and 525 an outlook that would imply a pause in the policy tightening after two more quarterpercentagepoint increases traders of futures that settle to the feds policy rate see the path somewhat differently with the benchmark rate peaking in the 475500 range and the central bank cutting that rate to around 44 by december reporting by howard schneider additional reporting by ann sahpir editing by paul simao