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Glowimages / Getty Images

  • The Federal Reserve’s two-day monetary policy meeting kicked off Tuesday and will conclude Wednesday.

  • The Federal Reserve is widely expected to hold its key interest rate steady as officials wait to gauge how President Donald Trump’s tariffs will affect the economy.

  • Trump has called on the Fed to lower interest rates, but the independent central bank seems unlikely to fold under the political pressure.

  • The Fed is expected to lower rates starting in July as tariffs begin to drag on employment.

The Federal Reserve’s two-day monetary policy meeting kicked off Tuesday, and officials will likely discuss how tariffs are working through the economy.

Central bankers are deliberating over monetary policy and are scheduled to release their decision about their key federal funds rate after the meeting at 2 p.m. on Wednesday. Following the announcement, Fed Chair Jerome Powell is expected to hold a press conference at 2:30 p.m.

Here’s what to know about the two-day meeting.

The Fed can either lower interest rates to boost the economy or raise them to push down inflation.

So far this year, central bankers have chosen to keep the fed funds rate unchanged at an elevated level. That streak of inaction is likely to continue, according to the CME Group’s FedWatch tool, which is pricing in just a 3.1% chance of a fed rate cut Wednesday.

At future meetings, the Fed may be forced to choose whether to fight inflation by keeping interest rates high, or boosting the economy to defuse tariff-induced job losses. So far, the economy has been resilient against the import taxes, which economists expect to increase prices and cost jobs.

It usually takes about three months for shocks to the economy to translate into worsening “hard data” such as the unemployment rate, David Mericle, economist at Goldman Sachs, wrote in a commentary this week. That suggests impacts from the tariffs, which went into effect in April, should start setting off alarm bells in official government data this summer.

Because of that, financial markets expect rate cuts to begin in July.

If the Fed holds rates steady as expected, Trump is unlikely to be pleased by the decision.

Last month, Trump took to social media to angrily demand the Fed cut interest rates, increasing political pressure on the Fed’s policy committee, which is not under the White House’s direct control. On Sunday, he reiterated his criticisms during an interview on “Meet the Press,” calling the Fed “stubborn.”