Some key Fed officials have been emphasizing in the weeks leading up to Wednesday's meeting that they are getting closer to having confidence inflation is sustainably dropping to their 2% goal.
They have also made it clear they are paying more attention to rising unemployment, another sign that cuts may be nearing.
Most Fed watchers say the central bank still needs just a bit more time to be sure, while also preparing the markets for the significant action to come.
The latest reassurance that a cut could be nearing came Friday when a new reading of the Fed’s preferred inflation gauge — the core Personal Consumption Expenditures (PCE) index — showed its lowest annual gain in more than three years.
The 2.6% annual increase in the month of June was the same level as May and down from 2.8% in April. On a three-month annualized rate, core PCE dropped back to 2.3% from 2.9%.
Another inflation measure, the Consumer Price Index (CPI), has also shown progress.
On a "core" basis — which excludes volatile food and energy prices the Fed can’t control — CPI rose 3.3% year over year in the month of June. That was down from 3.4% in May and 3.6% in April.
Some Fed watchers do argue the Fed has the basis to support a cut at its meeting this week, even as they note they don’t expect it to happen.
"I don't see a reason within the economic data that they should not cut this meeting," said Wilmington Trust chief economist Luke Tilley. "In fact, I think it's hard to see a reason that they should keep rates where they are."