The Fed minutes are today. Here’s what to watch.

The Fed held rates steady at the May 6-7 meeting of the Federal Open Market Committee, emphasizing a wait-and-see approach. The meeting minutes, scheduled to be made public at 2 p.m. Eastern on Wednesday, “should repeat the hawkish message from the May meeting and beyond," wrote Andrew Hollenhorst at Citigroup in a note Tuesday.

Fed Chair Jerome Powell expressed worry over tariff-induced inflation during a press conference that followed the meeting, but didn’t explicitly rule out rate cuts later this year. Since then, the economic data have been complicated: There are signs of slowing in parts of the economy, but not the kind that would prompt the Fed to move quickly.

The April consumer price index report showed a slowing of price growth, but core inflation remains persistent. While retail sales were lackluster, the labor market has so far been resilient.

Consumer sentiment has also been a mixed bag. A new survey by the Conference Board showed that Americans improved their view on the economy for the first time in five months in May. But the University of Michigan’s preliminary May release showed sentiment falling to its second-lowest level on record.

“The Fed is stuck between generally solid ‘hard’ economic data but declining ‘soft’ sentiment and survey data, with the complicating factor that trade policy can and has changed continuously," wrote Jeffrey Hibbeler, director of portfolio management at Exencial Wealth Advisors, in a note Tuesday. “Under normal circumstances, the Fed may have cut pre-emptively, had inflation not been running above their target for over four years and policy uncertainty at record levels."

Other Fed officials have echoed Powell’s caution, warning that they are still waiting for clarity on President Donald Trump’s trade policy and for his moves to work their way through the economy. At the same time, several have acknowledged that they now expect fewer cuts in 2025 than they had projected earlier this year. That shift will likely show up in the updated Summary of Economic Projections, which includes policymakers’ forecasts of interest rates, due at the June meeting.

Another area of interest in the minutes will be how much discussion there was regarding market volatility, especially in longer-dated Treasuries. “Some officials may have mentioned that a sustained move higher in longer-term Treasury yields could ultimately prove a headwind to the economy," said Hollenhorst.

The minutes may also offer insight into how unified the committee remains. Some officials have expressed reluctance to cut rates until inflation declines further, while others have warned about the risk of holding too tight for too long. Markets are still pricing in two cuts this year, according to the CME FedWatch Tool, but expectations have pulled back since earlier in the spring.

Then there is the question of central bank independence. Trump has openly criticized Powell and pressured the Fed to cut interest rates.

A recent Supreme Court decision gave Trump the authority to remove agency heads without cause, at least for now. But it drew a clear distinction between the Fed and other regulators. While the ruling doesn’t explicitly prevent the president from firing Powell or any other member of the central bank, it did provide some relief to market participants.

It is unlikely the minutes will refer directly to the bank’s independence, but if political risk is creeping into the conversation among policymakers, market participants will want to know.

The next FOMC meeting is less than a month away. Wednesday’s release won’t give much in the way of clues about coming policy, but it could shape how investors interpret the Fed’s next move and show how confident officials really are in their current path.

Write to Nicole Goodkind at nicole.goodkind@barrons.com