WASHINGTON — The Federal Reserve is nearly certain to keep its key interest rate unchanged at its policy meeting this week, just a few days after President Donald Trump said he would soon demand lower rates.

Fed officials, led by Chair Jerome Powell, have cut their rate for three meetings in a row, to about 4.3%, from a two-decade high of 5.3%. Yet with several recent economic reports showing healthy hiring and some progress on inflation, policymakers have said that the pace of rate cuts will slow this year. Some have suggested that few reductions are needed at all.

While the two-day meeting that ends Wednesday may be uneventful, it nevertheless kicks off what is likely to be a turbulent year for the Fed. Trump, last Thursday, made clear he expects to comment on interest-rate policy and said, “I know interest rates much better than they do.”

At the same time, Fed officials are also navigating a delicate period for the economy: They want to keep borrowing costs high enough to push inflation back to their 2% target, without keeping them too high for too long and plunging the economy into a recession.

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Trump Backs Off Threats of Firing Chair Powell

The last time he was in the White House, Trump threatened to fire Powell, whom he appointed in late 2017, but he has more recently backed off such threats. Powell’s term as chair ends in May 2026, when Trump can name a replacement.

Until then, Trump’s comments Thursday suggest he expects to regularly second-guess the Fed in public, despite a decades-long tradition among previous presidents of taking a hands-off approach to the central bank. Former president Joe Biden reappointed Powell, rather than replacing him, in a nod to central bank independence from politics.

Vincent Reinhart, chief economist at BNY Investments and a former top economist at the Fed, said Powell won’t let Trump’s attacks affect his policy decisions.

“If you like your independence, then you got to live with criticism,” Reinhart said. “If it’s all talk, it’s not a particular concern to the Fed. I think Chair Powell understands that’s the rules of the game.”

Meanwhile, Fed officials have clearly signaled they expect to skip a rate hike, at least in January, to evaluate the job market and economy.

“In January, we kind of need to see what’s going to happen,” Fed governor Christopher Waller said earlier this month in an interview on CNBC. Fed officials “need to see a little more progress on inflation,” he added, though he also said it is getting “very close” to their target.

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Annual Inflation was 2.4% in November

Annual inflation was just 2.4% in November, according to the Fed’s preferred gauge, only modestly above its goal, but it has been stuck there for about six months. Still, there are signs that prices should cool later this year. A spurt of apartment construction is bringing down the growth in rental costs, and car insurance inflation has also slowed.

Some officials, including Beth Hammack, president of the Fed’s Cleveland branch, have argued that the persistence of inflation means the Fed should keep its key rate elevated. Hammack voted against the Fed’s quarter-point cut last month.

Hiring rebounded in December, reversing a downshift in the fall that had unnerved the Fed. Policymakers had agreed to cut the Fed’s key rate by a half-point in September, partly because they worried that a then-weakening job market could lead to a recession. Yet the jobless rate ticked down to a low 4.1% last month. A sharp slowdown in hiring would likely spur the Fed to cut rates more quickly.

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Committee Divided on Cutting Interest Rates

Fed officials in December signaled that they expected to reduce rates just twice this year. But the 19-member committee that makes interest rate decisions is clearly divided. Some officials, such as Waller and Austan Goolsbee, president of the Fed’s Chicago branch, expect inflation to keep cooling and argue that the Fed’s rate doesn’t need to be so high.

Others, such as Hammack and Jeffrey Schmid, president of the Kansas City branch, say that with inflation still above target and the economy healthy, there is no need to reduce borrowing costs, or at least not by much.

A big unknown for the Fed this year is whether Trump will impose tariffs, how sweeping they will be, and whether they will push up prices. Mass deportation of immigrants could also force employers to pay more for workers to fill jobs, which could also lift inflation.

Most economists forecast that widespread tariffs will likely lift inflation by roughly several-tenths of a percentage point — not a large amount, but potentially enough for the Fed to postpone rate cuts. It could take months for the tariffs to be formally imposed and then to evaluate their impact on the economy. Some economists don’t think the impact will be apparent until next year.

Kevin Warsh, a former Fed governor and a potential candidate to replace Powell, argued in a recent column in the Wall Street Journal that Trump’s promises to reduce regulation could push in the other direction, by reducing costs for businesses, and bring down inflation.