Banco Santander SA's chief US economist predicts that the Federal Reserve's upcoming meeting will be the "most contentious" one yet. He stated he is "willing to go against the overwhelming consensus of financial markets and economists by calling for no action this week."

"The strongest argument for the Fed to act again this week is that markets have already priced in this expectation," wrote Stephen Stanley in his preview of the Fed meeting. The two-day meeting will conclude at 2 PM local time on Wednesday in Washington.

Swap trades linked to this week's Fed decision show a 90% probability of a 25-basis-point rate cut already priced in by markets, with this trend persisting in recent trading. Meanwhile, swaps tied to early next year indicate less than a 50% probability of another rate cut by March.

As markets anticipate the central bank easing monetary policy this week while signaling no guaranteed further action in January or March, US Treasury yields have risen. The policy-sensitive 2-year Treasury yield has climbed about 13 basis points in recent sessions, approaching a multi-month high of 3.61%.

"Historically, the Fed hasn't wanted to surprise markets," but Stanley outlined reasons why the Fed might do so this time.

Given that October's meeting minutes showed the rate cut decision then was "not easy," and Fed Chair Jerome Powell warned during his press conference that a December cut wasn't certain—followed by hawkish comments from other officials—Stanley said, "It would be hard to say pausing this week would surprise anyone."

"The final argument for pausing is that there will be a flood of data between this meeting and the next one at the end of January," and "if there's no particularly urgent case today, the committee would be better off waiting for the slew of top-tier economic data expected between mid-December and January."