The Federal Reserve 's decision Wednesday comes with the economy and markets on edge, but the central bank may not have the information it needs to reassure investors and prevent another dip for stocks. The Fed is widely expected to hold its benchmark interest rate steady on Wednesday, but traders will be looking closely for signs of the central bank's next move in the summary of economic projections and Chair Jerome Powell 's press conference. However, those projections should probably be taken with a grain of salt given that the tariff policy from the Trump administration remains murky. Goldman Sachs analysts suggested the Fed might continue to forecast two rate cuts this year even if that would be "awkward " to explain given the uncertainty of tariff policies on inflation. On Wall Street, stocks fell on Tuesday and the S & P 500 is again trading nearly 10% below its recent highs as investors fret over signs of an economic slowdown. Venu Krishna, Barclays equity strategist, said in a note to clients the market hasn't yet shown signs of "panic," but that might create downside risk for Wednesday's events. "Importantly, this may be due to markets' faith into the Fed put, which crucially could be put to test this week at the FOMC meeting, solicited, for instance, by a more hawkish than expected Fed, as inflation progress disappoints," Krishna said. The "Fed put" refers to the idea that the central bank would adjust policy to help prevent a steep sell-off in the equity markets. The Fed may not even need to be hawkish to spook the market, said Larry Benedict of the Opportunistic Trader. If the central bank signals it is still taking a wait-and-see approach on tariffs and inflation, that could also cause a negative reaction. "What you're going to see out of this meeting is obviously no movement on interest rates, but really I think a level of uncertainty that may surprise the market," Benedict said. The market has not seemed to have a good handle on the Fed as of late. The S & P 500 has closed lower in five of the past 10 Fed decision days, according to FactSet, with the biggest move in that stretch being a decline of nearly 3% on Dec. 18, two meetings ago. Benedict also pointed out the Cboe Volatility Index , or VIX, is still well below its levels from last August's sell-off and said stocks could still have further room to fall. .VIX 1Y mountain The Cboe Volatility Index, sometimes called Wall Street's "fear gauge," is well below its levels from the August sell-off. "I think the right play here is to have smaller positions. Volatility is a little bit higher, but I would say volatility, for what's going on in the market in a day-to-day basis, is not really that high," Benedict said. — CNBC's Michael Bloom contributed reporting.
