What to Watch as the Fed Meets

Federal Reserve officials are expected to leave interest rates unchanged on Wednesday, but investors and economists will be carefully watching for any hints about when policymakers could begin cutting borrowing costs.

Central bankers have held rates at 5.3 percent since July after a rapid series of increases starting in early 2022. Policymakers came into 2024 expecting to lower rates several times, but inflation has proved surprisingly stubborn, delaying those reductions.

At the conclusion of their two-day meeting on Wednesday, Fed officials will release economic projections for the first time since March, updating how many rate cuts they expect this year. Policymakers could predict two reductions before the end of the year, economists think, down from three previously. There is even a small chance that officials could project just one rate cut.

Regardless, central bankers are likely to remain coy about an important question: Just when will they begin lowering borrowing costs? Policymakers are not expected to cut rates in July, which means that they will have several months of data before their next meeting, on Sept. 17-18. Given that, officials are likely to try to keep their options open.

“It will be a message of patience, as simple as that,” said Yelena Shulyatyeva, senior U.S. economist at BNP Paribas. “We want to make sure that inflation is going down, and we will be happy to wait to see that happen.”

That won’t keep investors from watching a postmeeting news conference with Jerome H. Powell, the Fed chair, for any hint at when rates might finally start to come down — providing relief for would-be borrowers and further pepping up financial markets.