The Federal Reserve is expected to leave its benchmark interest rate unchanged at the conclusion of its two-day policy meeting on Wednesday in Washington, extending a cautious stance as tariff-driven price pressures cloud the inflation outlook. The Federal Open Market Committee announces its decision at 2pm Eastern time.

The central bank has held the federal funds rate in a target range of 4.25% to 4.5% through much of 2026, resisting pressure from President Donald Trump to cut borrowing costs. Rising import costs tied to new tariffs, alongside firmer energy prices, have complicated the path to the Fed's 2% inflation goal.

Recent data has offered a mixed picture. Consumer gasoline prices climbed back above $4 a gallon in several US cities this week, while the labour market has shown signs of cooling.

Analysts at Goldman Sachs and JPMorgan have said policymakers are likely to wait for clearer evidence before easing. Chair Jerome Powell is scheduled to hold a press conference following the announcement, where investors will scrutinise his language for any hint of a September rate cut.

Markets have priced in a strong chance of easing later in the year, and equities have wavered ahead of the decision. The meeting coincides with a heavy week of corporate earnings, adding to market sensitivity.

Several Fed governors have publicly diverged in recent weeks, raising the prospect of dissenting votes that would underscore internal debate over the balance between inflation and growth.