The Federal Reserve will host a two-day meeting starting today to discuss the state of the economy. A major topic will be the economic impacts of the Trump administration's tariffs and the potential for a recession due to the ongoing trade war.

At the end of the meeting on Wednesday, Federal Reserve Chair Jerome Powell will announce an interest rate decision. Most financial experts do not expect the Federal Reserve to cut interest rates this month.

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After federal interest rates reached their highest point in more than two decades in 2023, the Federal Reserve kept rates the same for more than a year to stave off inflation. As annual inflation dropped in the U.S. from over 9% to below 3%, the Federal Reserve decided in September 2024 to lower rates for the first time in over four years.

The federal rate dropped again in November and December. Between the three reductions, the Federal Reserve has lowered the federal interest rate by 1%.

The federal funds rate is the interest rate the government recommends banks charge each other for loaning excess reserves. While these rates are not directly tied to consumer interest rates, rates for car and home loans generally tend to rise and fall with the federal funds rate.

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Various tariffs being levied against America's largest trading partners have prompted concern that prices of consumer goods will increase. Most economists agree that companies facing tariffs on imported goods will pass the costs to consumers.

While the Federal Reserve had projected a continued decline in the federal interest rate, a sudden increase in inflation could cause the board to go in a different direction.