FOMC On Deck: Here's What to Expect on Wednesday
- Investors are looking to the U.S. central bank for support.
- The FOMC will announce its decision on Wednesday afternoon.
The Federal Reserve’s latest policy meeting kicks off today, with a decision expected on Wednesday at 2 p.m. Eastern Time.
You’d be forgiven if the meeting snuck up on you. Lately, the spotlight has been fixed squarely on the White House, where President Donald Trump’s ever-shifting trade war has whipsawed markets and upended economic forecasts. But even as trade dominates the headlines, the Fed still matters to markets.
Why the FOMC Decision Matters
While tariffs threaten to drag down growth, investors are hoping the Fed might provide some relief through interest rate cuts. That hope, however, will have to wait.
Futures markets are currently assigning a 98% probability that the central bank holds its benchmark rate steady at 4.25% to 4.5% this week. The real action will come during the Federal Open Market Committee's (FOMC) post-meeting statement and Fed Chair Jerome Powell’s press conference, as Wall Street will parse every word for clues on what comes next.
At the moment, the market is leaning toward a rate cut in July. Fed funds futures imply a roughly 75% chance that rates will be lower after that meeting. In total, they are pricing in three quarter-point cuts by the end of the year.
But that outlook is anything but certain.
Trade War Wild Card
The biggest wild card is the trade war. The president has flip-flopped repeatedly on tariffs—announcing sweeping levies, walking them back, then reinstating them—often with little warning. It’s created a chaotic backdrop for markets, businesses and central banks alike.
Still, despite the noise, the U.S. economy has remained resilient. The April jobs report showed a better-than-expected 177,000 positions added, and earnings from tech giants like Meta Platforms Inc. (META), Microsoft Corp. (MSFT) and Alphabet Inc. (GOOGL) have impressed.
For now, the data are holding up.
But the risks are mounting. Economists warn that if the latest round of tariffs, especially those targeting China, stay in place for much longer, the drag on growth will become unavoidable. That could force the Fed’s hand, despite lingering worries about inflation and the potential for tariffs to cause further consumer price increases.
We’ll learn more on Wednesday.
