"Yields are attractive, and there's going to be a lot of demand and there's not going to be a lot of bonds," said Scott Diamond, co-head of the municipal fixed income team at Goldman Sachs.

The discussion of rate cuts, both timing and amount, has analysts offering varying estimates.

"I believe policy is set properly," Waller said. "It is restrictive and should continue to put downward pressure on demand to allow us to continue to see moderate inflation readings."

The December consumer price index came in slightly stronger than expected, perhaps eliminating the possibility of a rate cut in March, analysts said.

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The muni market enters this year from a relative position of strength, said Jeff Lipton, managing director and head of municipal research and strategy at Oppenheimer.

Musalem, an economist, is a former executive vice president of the Federal Reserve Bank of New York.

This year has favorable potential for 1Q activity, noting an unusually large scheduled reinvestment potential in January and February, including $19 billion of maturities plus calls in January and $24.9 billion in February, noted MMA's Matt Fabian.

"A soft landing is increasingly conceivable but in no way inevitable," Barkin, who will vote on policy decisions this year, said in the text of a speech Wednesday.

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"It's important that we start to move rates down," Harker said Wednesday in a local radio interview. "We don't have to do it too fast, and we're not going to do it right away."

The Federal Open Market Committee meets Dec. 12 and 13 and in addition to their statement, they will issue a Summary of Economic Projections.

Federal Reserve Bank of New York President John Williams said it's too early for officials to begin thinking about cutting rates as soon as March as they consider whether policy is restrictive enough to get inflation back to 2%.

Muni yields fell up to five basis points and dramatically underperformed USTs, as they are wont to do on FOMC days. Treasury yields fell as much as 29 basis points on the two-year and sent the 10-year down closer to the 4% threshold.

The Federal Open Market Committee's Summary of Economic Projections probably won't offer the 130 basis points of cuts next year that the market expects.

With a high of $450 billion and a low of $330 billion, no firms currently see issuance surpassing the records hit in 2020 and 2021.

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This could be the first time the bond market has posted three consecutive negative total return years, according to John Hancock Investment Management Co-Chief Investment Strategist Matt Miskin.

"That is not how you drive policy and it's certainly not how you drive policy when the impact of policy happens with a lag," Mohamed El-Erian said. "This is the first Fed I know that has not gotten it."

"Regardless of the decision made at our next meeting, if the economy evolves as anticipated, in my view, we are likely near or at a holding point on the funds rate," Federal Reserve Bank of Cleveland President Loretta Mester said.