The US Federal Reserve began a two-day meeting Tuesday to decide whether to raise its benchmark lending rate to the highest level since 2001 in order to tame above-target inflation.

After a pause in June, the Fed is widely expected to push ahead with what would be its 11th interest rate hike since it started a campaign of monetary tightening in response to soaring inflation in March of last year.

The two-day policy meeting began at 10am local time, the Fed said in a statement. The interest rate decision will be announced at 2pm (1800 GMT) on Wednesday.

But despite an aggressive cycle of hikes, inflation remains above the central bank's long-term target of two percent -- although it has fallen sharply since peaking last year.

Futures traders assign a probability of close to 99 percent that the Fed will lift its base rate by 25 basis points on Wednesday, according to CME Group.

The quarter percentage-point hike predicted by analysts and traders would raise the Fed's benchmark lending rate to a range between 5.25-5.50 percent, its highest level in 22 years.

With the increase generally factored in by financial markets, attention has focused on how far and how fast monetary tightening might go.

At its last meeting, most members of the Fed's rate-setting committee predicted they would need to raise rates twice more this year in order to bring inflation down to target.

Recent positive economic news has increased the chances of a so-called "soft landing," in which the Fed succeeds in bringing down inflation by raising interest rates while avoiding a recession and a surge in unemployment.

It has also raised the likelihood that inflation could remain higher for longer, leading the Fed to hike again, perhaps as early as the next policy meeting in September.

For now, Bank of America economists wrote in a recent note to clients that they expect another 25 basis points hike in September, "though the Fed could decide that the last hike should come in November."

But not all analysts are convinced the Fed will hike again.

"We expect the Fed to undertake an eleventh (and final on our forecast) rate increase at next week's July FOMC meeting," Deutsche Bank economists wrote in a note on Friday, referring to the rate-setting Federal Open Market Committee.