Worries of a Fed policy mistake are growing amid a hot economy and sticky inflation

• There's a growing fear among market commentators the Fed will make a policy mistake.
• The concern is that cutting rates too quickly could lead to a resurgence of inflation.
• Investors see a nearly 100% chance of a quarter-point cut next Wednesday.

Investors see a rate cut at next week's Fed meeting as nearly a given, but fears are growing that the central bank might be about to make an error in loosening policy while inflation is creeping back up.

Former Fed officials have suggested that the central bank should consider pausing its rate-cutting cycle this month, despite the market's enthusiasm for continued policy easing.

Richard Fisher, a former Dallas Fed president, said he saw no reason for the Fed to trim rates at the coming Federal Open Market Committee meeting, pointing to the fact that inflation is firmly above the Fed's 2% target. Prices grew 2.7% year-over-year in November, according to the latest consumer price index report, up from the prior month's 2.6% growth.

Economic growth also remains robust, with GDP estimated to grow 3.3% over the fourth quarter, according to the Atlanta Fed's GDPNow tracker.

Employment, meanwhile, looks "quite strong," Fisher said, with the economy adding a more-than-expected 227,000 jobs in November.

"Financial conditions are very accommodative right now. Lot of private capital out there, private lending and so on. If I was at the table, I would say, 'Let's pause,'" the former central banker said in an interview with CNBC on Thursday.

Frederic Mishkin, a former Fed Governor, said that cutting interest rates with inflation still above target could produce a harmful setup for the economy.

"When inflation is higher than you'd like, you don't want to be in the situation and say you're just going to accommodate that. That actually produces very bad expectation dynamics," he told CNBC. "It's very important to get this nominal anchor in place in a strong way."

Economists have warned that the Fed cutting rates too early could risk reigniting inflation. It could also risk inflation expectations becoming unanchored, which could prompt stagflation, a situation in which growth is sluggish while prices remain stubbornly high.

Darrell Cronk, the chief investment officer of Wells Fargo's wealth and investment arm, said the Fed's decision to potentially cut interest rates in December could be a "mistake down the road." He pointed to corporate earnings strength as a measure that policy is already loose.

"The Fed doesn't have the ammunition to cut," he said, speaking to CNBC this week. "If earnings are going to grow 13%-15% next year, why would the Fed need to cut?"

Central bankers run a bigger risk of having to resume rate hike rates in 2025, Torsten Sløk, Apollo's chief economist, said in a note last week, citing strong economic growth and the inflation uptick in recent months.

"In other words, a repeat of what we saw in the mid-1990s, where the Fed, after a few cuts, started raising interest rates again," Sløk wrote.

Markets, though, are betting with near-certainty the Fed will cut rates another quarter-point at its policy meeting next week, with traders pricing in a 97% chance of a 25 basis-point cut, according to the CME FedWatch tool.

Odds, though, for the Fed to pause rates in January are climbing. Markets are pricing in just a 17% chance of another move down, compared to 27% a month ago.