Although inflation receded last month, an escalating trade war threatens to cause prices to rise on a wide range of consumer goods going forward.

Key Takeaways The Federal Reserve is widely expected to keep its interest rate flat at Wednesday's policy meeting.Fed officials are reluctant to make any monetary policy moves while they wait to see what President Donald Trump's economic policies will be enacted and how they'll affect the economy.

In serious crises the Fed has stepped in. It played a key role in stabilizing the financial system in the 2008-2009 financial crisis. And it made sure the U.S. economy didn't seize up entirely in the Covid-19 pandemic.

American families are growing sharply less optimistic about the economic outlook, but the Federal Reserve may be loathe to respond aggressively to a weakening economy in light of increasing worries that the Trump administration's trade policy will boost already elevated inflation.

The Federal Reserve will keep interest rates steady through the first half of the year, before delivering two reductions beginning in September, according to economists surveyed by Bloomberg News.