The Fed’s Two-Day Policy Meeting Kicked Off Tuesday—What You Need To Know

The two -day monetary policy meeting of the Federal Reserve was closed on Tuesday, and the officials will discuss how the tariffs are working through the economy.

Central bankers are discussing monetary policy and are scheduled to issue their decision on their major federal funds after the meeting at 2 pm on Wednesday. After the announcement, Fed Chair Zerome Powell is expected to hold a press conference at 2:30 pm

What do you know about the two -day meeting here.

Fed probably will not do anything … this time

The fed can either reduce interest rates to promote the economy or increase them to reduce inflation.

So far this year, central bankers have chosen to keep Fed Funds unchanged at a high level. According to the fedwatch tool of the CME group, the streak of inaction is likely to continue, which is pricing only 3.1% of the fed rate cut on Wednesday.

In future meetings, the fed can be forced to choose whether to fight inflation by keeping interest rates high, or promote the economy to reduce tariff-inspired job loss. So far, the economy has become flexible against import taxes, which economists expect an increase in prices and cost jobs.

It usually takes about three months for a shock in the economy, such as “hard data” to translate into unemployment rate, Goldman Sachs’ economist David Merrical wrote in a comment this week. This suggests the effects from tariffs, which came into force in April, this summer should begin installation of alarm bells in official government data.

Because of that, financial markets are expected to cut the rate of starting in July.

President Donald Trump has demanded low rates

If the Fed keeps the rates stable as expected, Trump is unlikely to be happy with the decision.

Last month, Trump took the political pressure on the Fed’s policy committee, taking Fed on social media to demand cut interest rate cuts, which is not under direct control of the White House. On Sunday, he reiterated his criticism during an interview on “Meat the Press”, calling Fed “stubborn”.

“Okay, (Powell) should reduce them. And at some point, he will not. He will not be it because he is not my fan. He just doesn’t like me because I think he thinks he is tough,” Trump said. “I want the people on that board to reduce it because we are at a right time. It is already late.”

Despite the demands, Trump also said that he has no plans to set Powell on fire, which ends in 2026, running back from previous threats.

‘Stagflation’ will be hard to compete for the Fed

In recent speeches, Fed officials have stated that they are concerned about the tariffs that carry prices and unemployment at the same time. If this happens, the fed will be unable to fight one problem without deteriorating the other: high interest rates can cool inflation, but can slow down the job growth, while low interest rates can help promote employment but stoke inflation.

Combined stable economic growth combined with high inflation, called “stagflation”, can be finally seen in the US in the 1970s, economically painful. Economists have a stagflation gauge called “Misri Index” that adds unemployment and inflation in a number.

In such a case, Powell said that the Fed has a playbook: first to deal with the worst problem.