The Federal Reserve is widely expected to maintain interest rates steady at its meeting this week, but investors will be closely monitoring whether central bank policymakers are still committed to two rate cuts this year. The Fed's latest round of projections, released on Wednesday, will include the much-studied "dot plot," a chart updated quarterly that shows each Fed official's prediction about the direction of the central bank's benchmark interest rate. The last dot plot, released in March, revealed a consensus among Fed officials for two cuts this year as some were already factoring the uncertainties of President Trump's economic policies into their projections. However, the latest curveball came late last week as Israel's airstrikes across Iran stoked fears that a protracted war could lead to higher oil prices and inflation this summer. Many Fed watchers expect central bank officials to stick with what they have already signaled as they weigh numerous unknowns. Former Kansas City Fed president Esther George predicts that "they will be reluctant to signal changes from where they were earlier" due to how fluid things are at the moment. Wilmington Trust chief economist Luke Tilley agrees, saying he doesn't expect many changes in the dot plot and that "it's two cuts, and I imagine it will stay pretty much the same." The Fed and its chair, Jerome Powell, are under an extreme amount of political pressure to speed up the timetable for any cuts, as President Trump continues to publicly criticize Powell for not easing policy sooner. Trump has been citing lower inflation as a reason for the central bank to cut, but Powell and many of his fellow policymakers have made it clear in recent weeks that they are still more worried about the risks of higher prices from Trump's tariffs than any rise in unemployment as they weigh both sides of their dual mandate. EY-Parthenon chief economist Gregory Daco expects Powell on Wednesday to stress the risk of longer-lasting inflation because of tariffs and acknowledge that difficult trade-offs may emerge if inflation stays elevated while growth and employment soften. He said Powell will likely emphasize that with inflation still above the Fed's 2% target and the job market consistent with full employment, the bar for cutting rates remains high. The latest measures of inflation have shown milder increases in prices even as tariffs were turned on full blast - a trend highlighted last week by Trump and Treasury Secretary Scott Bessent, who told lawmakers last Thursday that "there is no tariff inflation." The Fed's preferred inflation gauge, the "core" Personal Consumption Expenditures (PCE) index, rose 2.5% in April, down from 2.7% in March. The Fed's goal is to get this number down to 2%.
