Federal Reserve members kicked off two days of crucial interest rate talks on Tuesday, as the US central bank looks to chart a path between stubbornly high inflation and turbulent financial markets.
A majority of analysts and traders believe the Fed will raise its benchmark lending rate a quarter percentage point on Wednesday afternoon -- its ninth consecutive increase -- while a minority predict the US central bank will halt its hiking cycle on banking sector concerns following the collapse of Silicon Valley Bank (SVB).
A hike of a quarter percentage point would match the Fed's last increase at is most recent meeting in February.
"We expect the Fed to hike by 25bps (basis points) at this meeting, but the decision & outlook for any tightening depend on financial stability," Bank of America Global Research analysts wrote in a note to clients.
Futures traders also see a strong probability that the Fed will hike interest rates by 25 percentage points, according to CME Group.
Goldman Sachs, meanwhile, predicted that the Fed will take "a pause in the inflation fight" and hold rates.
"While policymakers have responded aggressively to shore up the financial system, markets appear to be less than fully convinced that efforts to support small and midsize banks will prove sufficient," Goldman Sachs Economic Research analysts wrote in an investor note.
SVB's collapse on concerns about its exposure to interest rates have spread far beyond its home state of California, leading to the collapse of several big banks in the United States and abroad.
Over the weekend, Swiss investment bank Credit Suisse became the highest profile casualty of the crisis. It was pushed to merge with regional rival UBS after worries about its internal controls led its share price to plummet. The merger leaves UBS as one of the world's largest wealth management businesses.
In the United States, volatility in First Republic Bank's share price continued Tuesday, with stock prices up close to 30 percent in premarket trading after another day of steep declines a day earlier.