WATCH: Federal Reserve Chairman Powell holds press conference after interest rate meeting

WASHINGTON (AP) – Federal Reserve officials are poised Thursday to cut their key interest rate for the second straight time, responding to a steady easing of inflationary pressures that irked many Americans and contributed to Donald Trump’s presidential victory.

Watch Federal Reserve Chairman Jerome Powell’s remarks in the player above.

Still, the Fed’s future actions are now more uncertain in the wake of the election, as Trump’s economic proposals have been widely flagged as potentially inflationary. His election has also raised the specter of the White House meddling in the Fed’s policy decisions, with Trump proclaiming that as president he should have a voice in the central bank’s interest rate decisions.

CLOCK: Trump is preparing to return to the White House after a decisive victory

The Fed has long maintained its status as an independent institution capable of making difficult decisions about lending rates, free from political interference. Still, during his previous tenure in the White House, Trump publicly attacked Chairman Jerome Powell after the Fed raised interest rates to fight inflation, and he may do so again.

The economy also clouds the picture by flashing conflicting signals, with solid growth but weakening employment. Still, consumer spending has been healthy, raising concerns that there is no need for the Fed to cut borrowing costs and that it could overstimulate the economy and even speed up inflation.

The financial markets throw another curve at the Fed: Investors have pushed government interest rates up sharply since the central bank lowered interest rates in September. The result has been higher borrowing costs across the economy, reducing the benefit to consumers of the Fed’s half-point cut in its benchmark interest rate, which it announced after the September meeting.

The average US 30-year mortgage rate, for example, fell over the summer when the Fed signaled it would cut rates, only to rise again when the central bank actually lowered its benchmark rate.

Broader interest rates have risen as investors expect higher inflation, larger federal budget deficits and faster economic growth under President-elect Trump. In what Wall Street has dubbed the “Trump trade,” stock prices also rose on Wednesday, and the value of bitcoin and the dollar rose. Trump had talked about cryptocurrencies during his campaign, and the dollar would likely benefit from higher rates and from the general increase in tariffs that Trump has proposed.

Trump’s plan to impose at least 10% tariffs on all imports, as well as significantly higher taxes on Chinese goods, and to carry out a mass deportation of undocumented immigrants would almost certainly boost inflation. This would make it less likely that the Fed would continue to lower its key interest rate. Annual inflation measured by the central bank’s preferred gauge fell to 2.1% in September.

Economists at Goldman Sachs estimate that Trump’s proposed 10% tariffs, as well as his proposed taxes on Chinese imports and cars from Mexico, could send inflation back to around 2.75% to 3% by mid-2026.

Such an increase is likely to offset the future rate cuts that the Fed had signaled in September. At that meeting, as policymakers cut their key rate by half a point to about 4.9%, officials said they envisioned two quarter-point rate cuts later this year — one on Thursday and one in December — and then four more. interest rate cuts in 2025.

But investors now see rate cuts next year as increasingly unlikely. The perceived likelihood of a rate cut at the Fed’s next January meeting fell to just 28% on Wednesday, down from 41% on Tuesday and from nearly 70% a month ago, according to futures prices monitored by CME FedWatch.

The jump in borrowing costs for things like mortgages and auto loans, even as the Fed cuts its benchmark interest rate, has created a potential challenge for the central bank: Its efforts to support the economy by lowering borrowing costs may not bear fruit if investors act to raise long-term lending rates.

The economy grew at a solid annual rate of just under 3% over the past six months, while consumer spending – driven by higher-income buyers – rose sharply in the July-September quarter.

At the same time, the companies have reined in employment, with many without work struggling to find a job. Powell has suggested that the Fed lower its key interest rate in part to strengthen the labor market. But if economic growth continues at a healthy clip and inflation rises again, the central bank will come under increasing pressure to slow or stop its rate cuts.