By Kate Davidson

The Federal Reserve will offer another glimpse Wednesday of policy makers' outlook for 2017 when it releases the minutes of the central bank's Dec. 13-14 policy meeting, at which officials voted to raise interest rates for just the second time in a decade. They could offer clues on the timing of rate increases this year, the extent to which the fiscal outlook is affecting their projections, and their assessment of risks as inflation edged up and the jobless rate dipped. The Fed releases the minutes at 2 p.m. EST Wednesday. Here's what to watch:

Uncertainty in 2017

Higher equity prices, a stronger dollar and rising longer-term interest rates since the U.S. presidentialelection signal that Wall Street expects the Trump administration to usher in a new era of fiscal expansion through tax cuts and higher spending. But the Fed's latest projections for growth and inflation were nearly unchanged from September, and Chairwoman Janet Yellen made clear at her Dec. 14 press conference that policy makers weren't getting ahead of themselves. "We're operating under a cloud of uncertainty at the moment, and we have time to wait and see what changes occur," she said. The minutes could offer more insight into officials' expectations for fiscal expansion, and how they planned to weigh the potential effects of Mr. Trump's policy proposals as they move forward.

Lifting the Path of Rates

In the projections released after the meeting, officials signaled they expected their benchmark interest rate to rise more steeply in 2017 than they anticipated a few months ago. In December, they penciled in three quarter-percentage-point increases this year. At their September meeting, they projected just two moves this year. Ms. Yellen played down the change, calling it a "very modest adjustment" with just some Fed officials moving their projections. Ms. Yellen also said some of her colleagues incorporated possible fiscal policy changes in their economic projections, but cautioned those changes "are only one of the many factors that can influence the outlook and the appropriate course of economic policy." Look to their policy discussion in the minutes for more clues about why some expected more rate increases amid a little-changed economic outlook.

Timing of the Next Rate Increase

After lifting rates by a quarter percentage point in December 2015, Fed officials expected to raise rates four times in 2016. Instead, they moved just once, at the end of the year. With the economy on a firmer footing last month, did they expect to move again this quarter? Or did they expect to wait a while longer to see how the economy and markets behaved? At her press conference, Ms. Yellen didn't offer any hints on the timing of the next rate increase, but the minutes could.

Full Employment Debate

A central debate among Fed officials late last year was how low they should let the jobless rate go, with one camp arguing they should continue to let it fall to bring more workers off the sidelines and into the labor market, and the other warning of runaway inflation if officials let it drop much further below the 4.6% reached in November. Their median projection last month showed they expected unemployment to fall to 4.5% by the end of this year and remain there through 2019, a sign they still see some slack in the labor market. The minutes could provide details of the discussion during the meeting.

Risks to the Outlook

At her press conference, Ms. Yellen didn't mention any particular risks to the economy. The Fed's postmeeting statement said officials saw risks to the outlook as "roughly balanced." The minutes likely will show which risks they were monitoring heading into the new year.

Write to Kate Davidson at kate.davidson@wsj.com

(END) Dow Jones Newswires

January 04, 2017 06:14 ET (11:14 GMT)

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