Markets are looking to the Fed for guidance on the economy — but the central bank may not be in charge anymore

• Economists are awaiting the Fed’s interest-rate decision amid macroeconomic uncertainties.
• Some economists are questioning the Fed’s control over managing the economy under the Trump administration.
• US economic outlook remains uncertain with concerns about a potential recession and market turbulence.

Markets are waiting for the US Federal Reserve’s interest-rate decision and its signals about the economy after its two-day policy meeting ends on Wednesday. However, analysts have other concerns beyond the regular gathering.

“We should worry about whether it fails to live up to the market’s hope for two or three rate cuts this year,” wrote Thierry Wizman, a global foreign exchange and rates strategist at Macquarie, in a Monday note.

“That worry is borne by the suspicion the Fed is not ‘in charge’ anymore, having relinquished control of macroeconomic policy to the Trump administration,” wrote Wizman.

Since taking office, President Donald Trump has sought to impose sweeping changes that could impact the US economy. They include changes to policies from US trade to immigration to a reduction in the federal workforce.

So far, the White House’s policy outlook — especially those involving tariffs — hasn’t been clear, Wizman wrote.

The White House did not respond to a request for comment from Business Insider.

The Fed delivered three rate cuts in the second half of last year and signaled further cuts. Analysts are now watching the pace of rate cuts after the central bank held rates in January.

Some analysts even think that the Fed could hike rates this year instead.

The Fed — which uses monetary policy and interest rates to manage the economy — is in a tight spot because it has little control over Trump’s policies.

“Simply put, what is driving current concerns about the economy is not an interest rate problem,” wrote Steven Blitz, the chief US economist at GlobalData TS Lombard, in a Tuesday note.

The White House “is bent on asserting its right to manage the economy, putting the Fed in second position, and believes they are revealing underlying weakness in the private sector as government spending is stripped away,” wrote Blitz.

The development has caused the macroeconomic and market outlook for the US — the world’s largest economy, which accounts for about one-quarter of global GDP — to remain uncertain as the second Trump administration appears to have a higher tolerance for market turbulence.

On Sunday, US Treasury Secretary Scott Bessent told NBC News that there are “no guarantees” there won’t be a recession. He also said he was “not at all” worried about the volatile stock markets.

US President Donald Trump has also recently declined to rule out the possibility of a recession. That kind of downturn typically prompts the Fed to cut rates to encourage borrowing for investment and spending.

While the Trump administration may be willing to accept a downturn as part of rebuilding the nation’s economic structure, “their shock therapy will amplify unintended consequences,” wrote Blitz.

“Against this backdrop, there is no reason for the Fed to step in and be pre-emptive,” he added, referring to rate cuts.

Wizman wrote that current economic uncertainty and a recent rise in inflation expectations — in part due to Trump’s tariffs on trading partners — could make it difficult for the Fed to send clear policy signals.

“Instead of signaling its own confidence in its outlook, the Fed may issue signals of no-confidence, instead,” he wrote. “In other words, the FOMC meeting may leave many questions unanswered, as will the press conference by Jay Powell.”

Economists expect Fed Chair Jerome Powell to hold off on cutting rates this round due to macroeconomic uncertainties as US President Donald Trump’s changing policies take hold. All 102 economists in an LSEG poll expect the rate to keep key interest rates unchanged at 4.25% to 4.5% on Wednesday.