What you have to watch at the May meeting of the Federal Reserve

The Federal Reserve will extend its break to interest cuts on Wednesday, since President Trump's tariffs will drop out a new pressure in inflation and at the same time violate growth, a difficult combination that could lead to painful compromises for the central bank.

A decision to stand Pat would keep interest rates at 4.25 percent to 4.5 percent, a level that was reached in December after a series of cuts in the second half of 2024.

Fed officials initially have a waiting and lake mode. They pursue the incoming data exactly for signs that consumer prices rise again after a multi -year fight to keep them in chess, or that an otherwise solid labor market begins to weaken. What you need is more clarity about what Mr. Trump has after a whirlwind of tariff announcements, cuts in government spending and deportations for the economy.

The Fed will publish its latest political explanation in Washington on Wednesday at 2 p.m. in Washington. Jerome H. Powell, the Fed chairman, will hold a press conference immediately afterwards.

Here is what you should pay attention to on Wednesday.

Temporary or persistent?

It is generally expected that the tariffs from Mr. Trump increase consumer prices. However, the question is whether this will be a one -time increase or a more persistent inflation problem. The answer determines how carefully the Fed runs with regard to the reduction in interest rates.

At the last session in March, Mr. Powell reported that the Fed case was “temporary” the tariff-induced inflation, which had revived a term that gained awareness after the Fed and other forecasters used it to describe the price pressure during the pandemic. Finally, they have caused the worst inflation leadership for decades.