Financial markets opened the day braced for a substantive pivot from the Federal Reserve as it prepares to cut its policy rate and publish longer-run projections that will stretch to the end of 2028. The move comes at a politically charged moment: the updated forecasts will be the first to encompass the full four-year span of President Trump’s term, allowing policymakers to incorporate anticipated fiscal changes into their outlook.

Traders and analysts have priced in the likelihood of an imminent reduction in the Fed’s policy rate, reflecting softer inflation readings and a steady labor market that many see as consistent with a more accommodative stance. While officials typically avoid forecasting the precise effect of fiscal policy on macro variables, the expanded projections will show how Fed officials now expect gross domestic product growth, unemployment and price measures to evolve relative to the June outlook.

“The importance of these projections is twofold,” said one macroeconomist following policymaker briefings. “They provide an explicit window into how the Fed thinks about longer-term trend growth and inflation, and they let markets test whether the central bank believes that the administration’s fiscal plans will meaningfully change the policy path.” Officials generally model scenarios out several years; extending the baseline to 2028, however, effectively folds in assumptions about tax, spending and regulatory choices that shape demand and deficits across a full presidential cycle.

The policy decision and attendant “dot plot” of rate expectations will be watched for both timing and magnitude of cuts. Even a modest reduction would have immediate market consequences: Treasury yields, mortgage rates and the dollar traditionally respond quickly to shifts in Fed guidance, while equity and corporate bond markets recalibrate risk premia. Lenders and borrowers alike will read the dot plot and the Fed’s statement for clues about the number of cuts the committee expects this cycle and the implied terminal rate farther out.

Beyond markets, the projections have fiscal-policy implications. If the Fed’s baseline assumes faster growth driven by fiscal stimulus, it may also signal a higher acceptable path for inflation, which in turn could raise borrowing costs for the Treasury over time. Conversely, if officials anticipate that fiscal expansion will be offset by supply-side gains or higher private investment, the Fed may show greater confidence in returning inflation to target while still trimming rates.

Policymakers will also use the projections to explain the interplay between near-term cyclical conditions and longer-term structural trends such as labor force participation and productivity growth. Those trend assumptions are critical: small adjustments in potential growth translate into different assessments of the natural rate of interest and the amount of policy accommodation that is appropriate.

Investors and policymakers will be parsing the Fed’s new forecasts for signs of recalibration. The expanded horizon adds political and analytical weight to what normally is a technical exercise: the Bank’s judgment about the long-term trajectory of the economy now has to account explicitly for a full presidential term — and the fiscal policy choices that will accompany it.