Fed officials will need to consider two issues related to the recent turmoil: Will there be further drama as other banks and financial companies struggle with higher rates, and will the bank trouble so far significantly slow the economy?
Mr. Powell could give the world a sense of their thinking at his news conference.
Economists are on pause patrol
Between the banking upheaval and how much the Fed has lifted interest rates already, investors expect policymakers to pause after this move. But don’t assume that means the slowdown is over.
Higher Fed rates are like delayed reaction medicine: They start to kick in quickly, but their full effects take a while to play out. Last year’s moves are still trickling through the economy, and by leaving rates on hold at a high level, officials could continue to weigh down the economy for months to come.
And it could be that central bankers will not actually pause: Some have suggested that if inflation remains rapid and growth keeps its momentum, they could raise interest rates more. But it seems possible — even likely — that the bar for future rate moves will be higher.
America is on recession watch
As high rates and bank problems bite, many economists think the country could be in for an economic downturn. Economists on the Fed’s staff even said at the central bank’s March meeting that they thought a mild recession was likely later this year in the aftermath of the banking crisis, based on minutes from the Fed’s last meeting.