What to Watch as the Federal Reserve Meets

The Federal Reserve is expected to hold interest rates steady at its first gathering of the year.

The decision on Wednesday reflects the central bank’s view that after three consecutive quarter-point reductions, which began in September, it can afford to take a bit more time to figure out its next steps. The Fed will release a new policy statement alongside its rate decision at 2 p.m. in Washington. Jerome H. Powell, the Fed chair, will hold a news conference at 2:30 p.m.

Rates, which were reduced in the latter half of 2025 to a range of 3.5 percent to 3.75 percent, are now considered to be in the realm of “neutral” — meaning they are low enough to no longer be restraining the economy as much as in the past but not so low that they are revving up growth either.

Most officials still see a path to cut rates further this year. But the timing and magnitude of those moves are yet to be determined.

Here is what to know about the meeting:

A rosier outlook: The economic backdrop has helped to bolster the Fed’s confidence that it can pause rate cuts at least for now. Just a couple of months ago, many officials harbored concern about the labor market. Those still exist but are much more muted, especially with growth expected to hold up much better than many economists had originally predicted.
New Fed voters: The Fed’s 12-person policy committee has four new members this year. Three of those new members expressed some form of opposition to some of last year’s cuts — Neel T. Kashkari, president of the Minneapolis Fed; Beth M. Hammack, president of the Cleveland Fed; and Lorie K. Logan, president of the Dallas Fed. Anna L. Paulson, who recently became president of the Philadelphia Fed, will also be joining the Federal Open Market Committee, although she has stood apart from her regional counterparts in backing up the central bank’s reductions and emphasizing the risks posed to the labor market. Even Ms. Paulson, however, has suggested the Fed can take its time before restarting cuts, underscoring the broad consensus that Wednesday’s vote to stand pat is likely to have.
Committee composition: The four regional presidents, who join the Fed’s policy-setting committee on a rotating basis, will vote alongside the seven members of the board of governors and the president of the New York Fed, all of whom have a permanent seat on the committee. The composition of the committee will matter significantly for Mr. Powell’s replacement as chair when his term ends in May.
Escalated attacks: The meeting comes as President Trump and his administration have escalated their attacks on the central bank and its leader. Mr. Powell accused the administration this month of opening up a criminal investigation into his handling of costly renovations at the Fed’s headquarters in Washington as retaliation for not slashing rates.
Political independence: Wednesday’s vote also comes after Supreme Court arguments last week in a lawsuit over whether Lisa D. Cook, a Fed governor, can remain in her post after Mr. Trump tried to oust her last year. While the Supreme Court has yet to deliver a final ruling, several justices appeared wary about the Fed’s ability to operate free of political meddling if her firing was upheld. Mr. Trump has not shied away from sharing his desire to fill a majority of the seats on the Fed’s board of governors with his supporters.