The Federal Reserve is widely expected to keep interest rates unchanged at Wednesday’s meeting.

It releases updated economic projections that could reveal whether policymakers now anticipate a path toward lower rates by year’s end despite mounting uncertainty from the new Trump administration’s policies.

At 2 p.m. EDT (1800 GMT), the Fed is scheduled to issue a policy statement alongside its latest projections, following a two-day meeting that has been scrutinizing how the economic outlook has shifted since President Donald Trump’s inauguration on January 20. Fed Chair Jerome Powell is set to hold a press conference half an hour later to discuss the implications of these updates.

Since taking office, President Trump has introduced a series of measures that include tariffs on Chinese imports and primary metals, with additional taxes on imports from key U.S. trading partners expected next month. Alongside these trade policies, the administration has also imposed immigration restrictions and initiated significant layoffs of federal employees, factors that have unsettled both stock and bond markets.

Policymakers had previously lowered the Fed’s benchmark rate by a full percentage point last year in response to easing inflation, with the expectation that rates would eventually move toward a neutral level that neither stimulates nor restrains economic activity. However, with early signals of falling confidence and a drop in government employment, questions remain about whether slower growth and higher inflation might ensue as a result of Trump's trade actions.

Investors currently anticipate that the Fed could implement two quarter-point rate cuts by year’s end, potentially bringing the overnight rate into the 3.75%-4.00% range. Yet, the emerging economic picture is more complex. The full scope of Trump’s tariff proposals remains uncertain, as the bulk of the measures—expected to impact countries such as Mexico and Canada as well as the global auto industry—is still taking shape. Additionally, looming debates over the federal debt ceiling, prospects for major tax cuts, and ongoing legal challenges add layers of uncertainty.

“The markets are reacting to the initial shock of these policies, and there's a growing concern that Trump's approach is engineering a ‘trade shock’ that could set the economy on a lower growth path,” said Steven Blitz, chief U.S. economist at TS Lombard. “There is little that monetary policy can do to offset the adverse effects of a trade shock, except to counter rising unemployment and inflation.”

In recent data releases, the labor market has shown signs of strain, with the jobless rate edging up to 4.1% in February and the economy adding only 151,000 jobs. Meanwhile, inflation remains stubbornly above the Fed’s 2% target, with expectations that the reading for February might register a slight increase. Despite these challenges, Fed officials have maintained their focus on core monetary policy issues—namely inflation and unemployment—while refraining from direct commentary on the Trump administration’s broader economic policies.

Analysts believe that the Fed’s new projections, which include year-end estimates for overall growth, unemployment, inflation, and the benchmark interest rate from all 19 voting members, may now incorporate heightened uncertainty. Some policymakers have already started hinting at the difficult choices that might lie ahead if Trump’s tariff plans begin to drive up prices, slow growth, and increase unemployment.

“Even if the Fed doesn’t explicitly discuss administration policies, the language in these projections could signal that we are now more concerned about their potential impact,” said Steve Englander, head of macro research for North America at Standard Chartered.

As the meeting concludes and the new projections are released, investors and policymakers alike will be watching closely for clues about how the ongoing trade tensions and broader uncertainties will shape the economic landscape in the coming months.

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