This week is important for the Federal Reserve's move to tighten monetary policy, even if, as expected, it does not raise rates.

Chairwoman Janet Yellen and other Fed officials will meet Tuesday and Wednesday in Washington to determine whether to raise the central bank's short-term interest rate target from zero, where it has been since 2008. Most Fed-watchers think they will not.

But the meeting will be quickly followed by significant economic reports on Thursday and Friday on three of the economic factors Fed is watching closely: Gross domestic product, inflation and wage growth.

"I think it's going to be a really big week," said Laura Rosner, U.S. economist at BNP Paribas.

The data could be enough to confirm Yellen's view of the U.S. economy, namely that the first-quarter slowdown was merely transitory, that the labor market is getting hot, and that inflation is going to move up to the Fed's 2 percent goal.

Or it could disappoint, once again delaying the day when the Fed moves away from its emergency policies.

Here are the key datapoints:

Economic growth

On Thursday, the Bureau of Economic Analysis will release its first estimate of gross domestic product growth for the second quarter.

Following the disastrous first quarter, in which the economy shrunk at a 0.2 percent annual rate, economists expect that the second quarter will see growth near a 3 percent rate.

The first quarter "rattled some [Fed monetary policy committee] participants because there were a number of different shocks that affected economic activity and it wasn't clear how persistent those shocks would be," Rosner said.

A pick-up in growth would boost Yellen's view, expressed in congressional testimony this month, that the first-quarter problems were one-time, transitory issues and that the outlook for growth is "favorable for improvement" the rest of the year.

The bureau will also release updated estimates for the past three years' worth of GDP readings, including more information from different sources. The new figures could reveal that the economy was stronger, or weaker, than was thought at the time.


The same report will include an implicit look at the inflation measure the Fed watches most closely, namely the Personal Consumption Expenditures price index.

Inflation has been low or non-existent in recent months because of the collapse in the price of oil. Even setting aside the effects of oil prices, however, inflation has been low. Core inflation, which excludes volatile energy and food prices, was 1.2 percent in May, below the Fed's long-term 2 percent target.

While inflation is low, it may not take long for it to reach a level that the Fed sees as fine for raising rates. An analysis published by the Federal Reserve Bank of San Francisco earlier this month found that the inflation rate is within the range of historical variation around the target, and that it can be expected to increase as unemployment falls.


On Friday, the Bureau of Labor Statistics will release the Employment Cost Index, which provides a metric of not just wages and salaries but also fringe benefits.

In the first quarter, the index showed the first signs of real wage gains heading up toward the roughly 3 percent to 4 percent Yellen has suggested is healthy.

Total compensation grew 2.6 percent annually in the index, well above the near-2 percent growth that had been the norm.

That was one of the "tentative signs that wage growth has picked up" that Yellen cited in her congressional testimony this month.

If the index is up again, "I think it does light up, a little bit, the dashboard," said Stuart Hoffman, chief economist for the PNC Financial Services Group.

Yellen has said that an acceleration in wage growth is not necessary for the Fed to raise rates. It would, however, be a sign that falling unemployment and decreasing labor market slack are translating into inflationary pressures.

Altogether, it's not likely that the Fed will give any hints to whether it will move in September, Hoffman said, beyond updating its description of the strength of the economy.

Currently, market prices indicate that investors put the odds of the Fed raising rates in September at one in six.

Beyond that initial increase, however, the Fed will move slowly to tighten money. It will "seem more glacial than it'll seem like a 'liftoff,'" Hoffman said. "It will move like a glacier, not like a rocket."