Fed Back in Focus as Markets Signal a Down Start to the Week

After a roller-coaster week in which markets and economists were occupied with the effects of President Donald Trump’s tariffs, the focus turns this week to something more predictable.

That will be the state of interest rates as the Federal Reserve meets to consider monetary policy. The stock market surged 650 points to end a week that still left major indexes near correction territory. Among the concerns: tariffs and a sharp increase in consumers’ inflation expectations.

While the Fed is likely to do nothing when it makes an announcement Wednesday, what Chairman Jerome Powell will say at his press conference afterward will be closely watched. The central bank will also update its projections of economic growth, interest rates and unemployment. Growth in gross domestic product is expected to be revised downward, while the estimate for the unemployment rate may be notched upward.

“The message from the Fed at this week’s meeting will be more upbeat on the economy as the very sharp rise in inflationary expectations will be tying the Fed’s hands.” Richard de Chazal, macro analyst at William Blair, wrote early Monday. “It can no longer act preemptively at the first whiff of an economic slowdown, and now must wait for more definitive evidence of lower inflation and softer growth before lowering rates further.”