Federal Reserve expected to raise key interest rate for 10th time amid banking turmoil

On the other hand, inflation, while slowing, is persisting at a level far above the central bank's 2% target rate, raising concerns that the Fed might have to further tighten credit to slow price increases. Additional rate hikes would follow - a trend that would lead to ever-higher borrowing rates and heighten the risk of a recession.

Austan Goolsbee, president of the Federal Reserve Bank of Chicago, last month cited the banking turmoil and the likelihood that many banks will tighten credit for consumers and businesses as a reason to potentially forgo a rate hike this week. Other regional Fed bank presidents, including James Bullard of the St. Louis Fed and Neel Kashkari of the Minneapolis Fed, have said they would prefer that the central bank remain steadfast and lift its key rate to at least 5.4%, which would require additional rate hikes after this week.

Wall Street traders were also unnerved by Monday's announcement from Treasury Secretary Janet Yellen that the nation could default on its debt as soon as June 1 unless Congress agrees to lift the debt limit before then. The debt limit caps how much the government can borrow, and Republicans in Congress are demanding steep spending cuts as the price of agreeing to lift the borrowing cap.

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