Federal Reserve Policy Meeting: Powell to Address Trade and Inflation Uncertainties

Investors anticipate no surprises from the Federal Reserve's policy meeting on Wednesday, with interest rates expected to remain unchanged after a series of three consecutive cuts in 2024.

Powell's press conference in focus as he faces questions on:

* Trade policy impacts: President Trump's threats of tariffs on Mexico, Canada, and China have raised concerns about inflationary pressures.
* Demand for lower rates: Trump has expressed his desire for further rate cuts, potentially clashing with Powell's cautious stance.

Economists predict Powell's approach will be one of caution, with the Fed chair likely to:

* Emphasize the use of individual economic projections by Fed members in policy decisions.
* Stress the Fed's reliance on data and changing economic conditions for future rate adjustments.

Inflation concerns linger: Fed officials acknowledge increased downside risks to inflation, leading them to scale back rate cut expectations.

* December CPI data showed a slight deceleration in core price growth, while annual inflation dipped to 3.2%.
* PCE inflation gauge, the Fed's preferred measure, is expected to remain unchanged at 2.8% in December.

Possibility of rate hike discussed:

* Economists raise concerns that the Fed may need to consider raising rates this year, a move that would likely face opposition from Trump.
* Harvard economist Ken Rogoff suggests the odds of a rate cut and a rate hike are equal, highlighting potential risks from government spending and advancements in AI.

Market impact:

* The Fed's policy decision and Powell's press conference will be closely watched for their impact on market sentiment.
* Any indication of a shift in policy or a divergence between the Fed and the White House could trigger volatility.