Consumers and traders are waiting to learn if the Fed’s pause is a one-meeting hold or the start of a longer stretch.

The Federal Reserve on Wednesday hit pause on interest rate cuts in its first key decision of President Donald Trump’s second term.

The decision reflects a cautious stance as the Fed assesses the direction of inflation and policies President Trump may implement.

Economists expect the Federal Reserve to keep interest rates unchanged as its Open Market Committee is set to conclude its meeting on Wednesday afternoon.

After the inflation report, released at the same time as hawkish monetary policy remarks from Fed Governor Michelle Bowman, traders of futures that settle to the Fed's policy rate priced in about a 70% chance that the short-term borrowing rate will be 4.

It's important to understand that the Fed's decision to pause rate cuts will not directly impact mortgage rates. Mortgage rates are actually driven by a range of factors, including the Fed's rate changes. This week's Fed rate decision does, however, have a big influence on where mortgage rates could head.

Federal Reserve governor Michelle Bowman said she still expects declining inflation to allow further interest rate cuts this year, but feels rising wages, buoyant financial markets, geopolitical risks,

Policy changes: When the Fed adjusts the federal funds rate, it spills over into many aspects of the economy, including mortgage rates. The federal funds rate affects how much it costs banks to borrow money, which in turn affects what banks charge consumers to make a profit.

The Federal Reserve left its benchmark interest rate unchanged after three consecutive cuts last year. The decision signals a more cautious approach as it assesses inflation trends and the potential impact of President Trump’s policies.

An inflation gauge closely watched by the Federal Reserve rose slightly last month, the latest sign that some consumer prices remain stubbornly elevated, even as inflation is cooling in fits and starts.

U.S. President Donald Trump is getting his wish that interest rates drop across the world, just not at home where a strong economy and uncertainty over his own policies have set the stage for the Federal Reserve to diverge from its central bank peers.