The Federal Reserve meets on Wednesday. Here's what you can watch.

Federal Reserve officials will conclude their two-day meeting on Wednesday, and are widely expected to keep interest rates steady at 20-year highs when they announce their policy decision at 2 p.m.

But investors are likely to keep a close eye on the meeting — especially Chairman Jerome H. Powell's news conference at 2:30 p.m. — for clues about when policymakers might start cutting rates. The Fed has kept its policy rate within a range of 5.25 to 5.5 percent since July, and officials forecast in December that they could cut borrowing costs by three-quarters of a percentage point over the course of 2024.

But both the timing and size of these interest rate cuts remain uncertain. On the one hand, inflation has fallen faster than many economists expected in recent months. On the other hand, economic growth is proving stronger than expected, which could give companies the means to continue raising prices in the future.

Here's what you need to know about this meeting.

The Fed's statement could change.

The Fed's policy statement after the meeting has proposed that officials will monitor economic data “in determining the extent of any additional policy reinforcements that may be appropriate.” Now that further interest rate increases appear less and less likely, that language may need to be adjusted.

Powell has a delicate balancing act.

Fed officials don't want to keep interest rates so high for so long that they put too much pressure on the economy and push it into a recession. On the other hand, they do not want to cut interest rates too early, which could accelerate the economy and risk inflation rising again. Mr. Powell could talk about how officials will try to strike that balance.

GThe argument versus inflation will be critical.

Much of what comes next will depend on which numbers Powell and his colleagues decide to focus on – growth or inflation – and investors may get a hint about that this week. Growth and consumer spending are both faster than many economists expected. But the Fed's preferred inflation measure is also below 3 percent for the first time since early 2021, even after removing food and fuel costs, which can fluctuate from month to month.

Investors remain uncertain.

The conflicting signals have made Wall Street less uncertain about what the Fed will do next. Most investors previously expected a rate cut at the next Fed meeting in March. But sentiment is now tilting towards a rate cut in May. Mr Powell's comments will have the potential to change those expectations – making an upcoming rate cut more likely, or pushing it further off the table.

“It's a conversation about: when do they start lowering rates? Because they don't want to tighten too much,” said Gennadiy Goldberg, chief U.S. rates strategist at TD Securities.

“We are entering the last non-live meeting,” he said, meaning that while no rate change is expected in January, rate cuts could be on the table at any subsequent meeting.

The pace of interest rate cuts is an open question.

Another thing to pay attention to on Wednesday: When the Fed starts cutting rates, what will that likely look like? Rate cuts can happen quickly and steadily, be large or small, and occur earlier or later in the year.

Fed Governor Christopher Waller has already suggested that the central bank should be able to cut rates “methodically and carefully,” rather than through the big rate cuts that have occasionally occurred in the past.

Balance sheet details may still be forthcoming.

The Fed has shrunk its bond holdings balance sheet after it grew sharply during the pandemic as the central bank bought securities to calm markets and stimulate the economy.

Officials have reduced their holdings by allowing their securities to mature without reinvesting them. But policymakers will have to stop doing that at some point, because reducing bond holdings too much could cause chaos in the markets.

In fact, the minutes of the Fed's December meeting showed that officials thought “it would be appropriate for the committee to begin discussing the technical factors that would guide a decision to slow the pace of the drawdown , well in advance of any such decision being made, so as to provide appropriate prior notice to the public.”

Will that discussion about the nerdy details happen at that meeting? Economists will be wary.