As the Federal Reserve chair Jerome Powell and other officials convene for a two-day meeting this week, the U.S. economy is showing signs of strength but also facing challenges.

Despite low unemployment rates and decreasing inflation, President Trump's tariffs are causing concern about potential inflation spikes and economic slowdowns in the near future.

With this uncertain outlook, Fed policymakers are likely to maintain the current key interest rate of 4.4% on Wednesday and release projections indicating a possible increase in inflation and slight uptick in unemployment later this year.

Economists predict that the Fed may decide to lower the key rate twice later in the year to address these economic shifts.

The conflicting signals of higher inflation and rising unemployment are putting the Fed in a difficult position, prompting them to wait for clearer indicators before making any significant changes.

President Trump has been vocal about his desire for rate cuts to boost economic growth, despite concerns about the impact on inflation and government deficits.

While a rate reduction could lower borrowing costs for consumers and businesses, it may not lead to significant changes in longer-term rates determined by financial markets.

Trump's pressure on the Fed to cut rates has raised questions about the central bank's independence and its mandate to focus on stable prices and employment.

Despite the current low inflation levels, the Fed could face increased pressure to cut rates if inflation rises in the future, especially as the economy weakens due to tariffs.

While some economists predict a temporary spike in inflation, others believe that a slowing economy could counteract this effect and lead to a quicker rate cut by the Fed.

Overall, the Fed is expected to take a cautious approach and wait for more data before making any significant rate decisions in response to the evolving economic conditions.