As the U.S. Federal Reserve’s Federal Open Market Committee begins a two-day policy meeting to decide whether to raise interest rates, it’s missing one key element it has said is needs before making any hikes.

A U.S. Labor Department report issued Wednesday morning shows inflation is virtually nonexistent, with the Consumer Price Index falling 0.1% in August from the month before, the first drop in seven months, and just 0.2% higher over the past year.

That’s well short of the Fed’s goal of a 2% annual inflation rate.

Gasoline prices' sharp 4.1% drop last month was the main reason for the month-over-month drop. When volatile food and energy prices are removed from the August CPI, it rose just 0.1%, the same as July’s increase.

The only possible indication that inflation is close to what the Fed would like to see is that over the past year, this measure of inflation, less food and energy, increased 1.8%. This is the same year-over-year increase as we saw in July, and it's the fifth time out of the last six months it has been at this level.

The FOMC is expected to conclude its meeting Thursday afternoon and announce whether it will raise interest rates for the first time since 2006.

Heading into this week's meeting, several committee members said they had not yet made a decision on whether or not to vote for a rate increase. They suggested they would be watching the incoming data up until the last moment, and the data alone would be the deciding factor.

Many analysts say the decision is too close to call, due a clear lack of direction on which way the economy is headed.

“If, in fact, policy makers are watching the latest round of U.S. data, a further decline in manufacturing activity, weaker-than-expected headline job creation and consumer spending, as well as another month of waning price pressures as reported this morning should be enough to keep the Fed on the sideline well beyond September,” said Lindsey Piegza, chief economist with Stifel Fixed Income. “With further global weakness translating into continued downward pressure on commodities and raw materials, U.S. inflation is likely to remain increasingly benign for the remainder of the year and beyond, undermining any notion of confidence inflation will begin to reverse course back towards the Fed's target of 2%.”

She said even if the Fed “sidesteps logic and raises rates in a desperate attempt to get off zero after years of accommodation,” the pathway of rates is likely to remain slow and steady as the U.S. economy continues to struggle to produce organic growth beyond a 2% average pace.