Stock market selloff? What stock market selloff?

As a growing number of traders bet the Federal Reserve will slow its pace of U.S. interest-rate increases early next year, at least one member of central bank rattled off a list of decision-making issues that didn't even include the recent drop in stock prices. 

Richard Clarida, the Fed's vice chairman, emphasized the need for "data dependence" in a speech on Tuesday, Nov. 27, focusing on economic growth, inflation and the unemployment rate.

The central bank, led by Chairman Jerome Powell, has been raising interest rates since 2015 to keep inflation from surging as the economy strengthened. The effort has drawn criticism from President Donald Trump, who has lobbed repeated criticisms at the central bank for raising interest rates too quickly, saying Powell is making a mistake that has unnecessarily impeded economic growth and damped enthusiasm in the stock market.

The Standard & Poor's 500 Index has tumbled 7.7% in the past three months, wiping out gains for the year, as traders fretted that the economic stimulus from Trump's $1.5 trillion of tax cuts last December might already be fading.  

But Clarida, in his speech, said that risks to the economy were "symmetric" and that raising interest rates too slowly could "result in rising inflation and inflation expectations down the road that could be costly to reverse" and ultimately lead to a financial crisis. 

"Risks have become more symmetric and less skewed to the downside than when the current rate cycle began three years ago," Clarida said. 

Recent trading in futures markets shows that most traders still expect the Fed to increase rates in December, but speculation has waned that the central bank will hike its benchmark rate during the first half of next year.

The odds of an additional 0.25-percentage-point increase at the Fed's meeting next March have tumbled to 34% from 49% a month ago, according to data provider FactSet. And the chances of two quarter-point increases during the first half of next year have tumbled to 13% from 27%.

And while Powell has insisted that the central bank would raise rates at a gradual pace for the foreseeable future, recent underperformance in the stock market could give the Fed pause, according to analysts at the German lender Deutsche Bank AG (DB) - Get Report

According to the Deutsche Bank analysts, traders will pay close attention to a scheduled speech by Powell on Wednesday, Nov. 28, in New York, when the chairman may clarify whether his views on monetary policy have shifted as a result of the recent market drop. Investors also are likely to scrutinize the publication on Thursday of minutes from a Fed monetary-policy meeting earlier this month.  

At that meeting, the Fed held rates steady in a range of 2% to 2.25%. 

Wall Street analysts say Trump's tax cuts spurred a burst of economic growth earlier this year, but recently signs have appeared that the effect of the stimulus may already be fading. The cost of the tax cuts, of course, is a widening federal deficit that has helped to balloon the national debt past $21.7 trillion, spurring fears that higher U.S. government interest payments could eventually become a drag on the economy.

Growth in U.S. gross domestic product slowed to 3.5% in the third quarter from 4.2% during the second quarter, and it's projected to slow to 2.6% during the last three months of the year. Economists surveyed by FactSet expect a further slowdown to 2.5% in 2019 and 2% in 2020 -- below even the 2.2% long-term growth rate projected prior to the enactment of the tax cuts.

Last week, Powell said at a public event in Dallas that a recent slowdown in global economic growth was "concerning," according to news reports, prompting speculation that he might be rethinking his plan to keep raising rates. Slower growth would reduce the likelihood of faster inflation, relieving pressure on the Fed to act.