The first Federal Open Market Committee (FOMC) meeting of the year started Tuesday, after the U.S. economy finished 2024 with stable employment and stubborn inflation.

The Federal Reserve’s policy-setting group is discussing progress on the Fed’s fight against inflation and whether to cut its influential federal funds rate. Their decision is set to be released Wednesday at 2 p.m. ET. Federal Reserve Chair Jerome Powell will give more details and answer questions at a press conference scheduled for 2:30 p.m.

The Fed, which cut its benchmark rate at each of its last three meetings dating back to September, isn’t expected to trim the fed fund at this meeting. The Fed had warned after the last meeting that the pace of easing would likely slow due to persistent inflation pressures.

Not much has changed in the economy since the Fed’s December meeting. However, uncertainty around the new administration’s economic policies is intensifying, which could make Fed watchers scrutinize the FOMC’s post-meeting statement and Powell’s comments more than usual.

The Economy Is Holding Steady …

The Fed has a dual mandate to promote price stability and maintain maximum employment. High post-pandemic inflation led the Fed to keep interest rates at a two-decade high before starting to cut last fall, when concerns started to grow about rising unemployment.

According to the most recent data available, December inflation remained stubborn, but Fed officials said they were confident it was still on the way to their target of 2% annually.

“The process of disinflation remains in train,” said Richmond Federal Reserve Bank President Thomas Barkin earlier this month.

As for the labor market, employers surprisingly added 256,000 jobs in December, beating economists’ expectations of 155,000.

… And Interest Rates Likely Will, Too

Because there is little threat of widespread job loss and progress has stalled on the fight against inflation, economists and market participants widely expect the Fed will keep its influential interest rate untouched on Wednesday.

According to the CME Group’s FedWatch tool, which forecasts rate movements based on fed funds futures trading data, as of Tuesday there is a 97.3% chance that the committee will leave the fed funds rate at its current range of 4.25% to 4.50%.

The Fed members themselves made similar projections in December. The majority of FOMC members predicted they would only cut the federal funds rate by 50 basis points this year—half of the cuts they made in 2024.

Trump’s Policies Are Causing Uncertainty

Economists and Fed officials said the plan to bring inflation back down could change if President Donald Trump enacts some of his proposed economic policies.

Tariffs, in particular, could change the U.S. economic outlook. After the December Fed meeting, Powell said the committee is moving more slowly on rate cuts in part because it is unsure of what those trade policies could look like.

Tariffs were notably not one of the executive orders that Trump signed on his first day in office. He did, however, say that tariffs could be implemented as soon as Feb. 1.

This is the first FOMC meeting under Trump’s second administration. However, Trump and Powell have been on a collision course since the presidential election. Trump threatened the independence of the Fed on the campaign trail, and Powell has maintained that it is vital that the central bank remain free from presidential control.

Just last week, Trump told a gathering of world economic leaders that he would “demand that interest rates drop immediately” if oil prices decline.