American families are growing sharply less optimistic about the economic outlook, but the Federal Reserve may be loathe to respond aggressively to a weakening economy in light of increasing worries that the Trump administration's trade policy will boost already elevated inflation.

Inflation could continue to be ‘persistent’ and prices could potentially increase again, Federal Reserve Governor Adriana Kugler told CNBC’s Silvia Amaro.

Key Takeaways The Federal Reserve is widely expected to keep its interest rate flat at Wednesday's policy meeting.Fed officials are reluctant to make any monetary policy moves while they wait to see what President Donald Trump's economic policies will be enacted and how they'll affect the economy.

The Federal Reserve will keep interest rates steady through the first half of the year, before delivering two reductions beginning in September, according to economists surveyed by Bloomberg News.

The Federal Open Market Committee is expected to vote next Wednesday on whether to raise, lower or maintain interest rates at current levels amid heightened concern that a recession may be looming for the US economy.