As the Fed tries to stay firmly out of the limelight, markets are buckling up for another Trump tirade 

• ANALYSIS: With the Federal Open Market Committee (FOMC) likely to hold interest rates steady, political pressure from President Trump threatens the Fed’s historically independent role in setting economic policy. Analysts expect Powell to maintain a cautious, data-driven stance amid rising uncertainty, while markets brace for backlash from the White House that could inject further volatility.

Whether or not they'd like to admit it, there will be an elephant in the room when the U.S. central bank's Federal Open Market Committee (FOMC) meets this week.

The Jerome Powell-led group have said time and again their decision-making process—namely what to do with America's interest rate—is based on economic data and anecdotal evidence from business owners and employees. Politics never comes into it, they have specified.

And yet President Donald Trump seems determined to insert himself into the conversation—whether it's pressuring the FOMC to hold or lower rates, or saying he should be the one making the final call.

With Powell widely expected to announce a hold of rates at 4.25% to 4.5% following the meeting this week, markets are already bracing for a tirade from President Trump which may inject even more volatility into the already turbulent outlook.

Trump's potential intervention is unorthodox in the historic relationship between central bank and government, where there is usually a clear line between church and state.

The reasoning for the federally-mandated divide is clear: The base rate, which impacts everything from employment to foreign investments to the bond market, cannot be used as a pawn in the game of politics.

The role of the FOMC is to ensure the base rate is used to ensure two things: Maximum employment and an inflation rate of 2%, steadying the economy over the long term.

The regional bank presidents and economists who make up the FOMC have a complicated tapestry to unpick when determining their decision.

One of the issues raised will of course be the White House's tariff policy—which has been mentioned by the FOMC before not as commentary on the policy, but on their potentially inflationary effects.

However the picture is muddied by the fact the rates announced on 'Liberation Day' were higher than analysts feared, but subsequently delayed by the Oval Office pending deals with key trading partners which are yet to be confirmed.

Uncertainty is firmly rooted into the outlook, wrote Deutsche Bank's Jim Reid in a note this morning seen by Fortune.

"Our U.S. economists expect the FOMC to keep rates steady and avoid explicit forward guidance about the policy path ahead," Reid said. "They continue to see the next rate cut coming in December and while risks are tilted towards earlier easing, in their view this would require a clear weakening of the labour market."

Little guidance expected

While markets typically hang on every word from Powell in his post-meeting press conference, analysts are warning there will be few hints in his guidance come Wednesday.

As Macquarie strategists David Doyle and Chinara Azizova wrote in a note Monday: "The market reaction is likely to focus on the communication and the potential guidance of further cuts. Statement language changes are likely to be limited, but may place more emphasis on the rise in uncertainty and some recent signs of weakening growth.

"As he did in March, Chair Powell is likely to stress that the committee is in no rush to cut rates further and will proceed 'patiently' and 'carefully'."

Powell's speech is likely to reflect similar sentiments to his April update, the pair added, focussing on uncertainty, the Fed's dual mandate being in tension and its independence.

On mandate tension, Doyle and Azizova wrote: "Policy shifts could create conditions of both elevated inflation and a softening in the labor market.

"The messaging on this will likely remain similar to what has been communicated previously, which is that the Fed would consider i) the distance the economy was from each goal, and ii) the time horizons over which the gaps were anticipated to close."

On independence, the duo added: "Given the recent newsflow, this is also likely to be a focus. The Chair is likely to remain resolute and steadfast on this topic, as he has in the past."

The precedent for Trump's interference

Trump and his team have criticized the Fed on a range of issues.

On the campaign trail the then-Republican nominee said Powell shouldn't cut ahead of the election as it would give the Biden camp an economic win—before saying the FOMC was playing politics when it did so.

Vice President JD Vance then said politicians should have more of a say in the base rate because they are democratically elected, with President Trump adding he should have more of a say because of his understanding of the business world.

Since winning the White House, Trump has lobbied for rate cuts to come down. Since then he has flip-flopped on whether or not he will try to fire Powell, with the Fed chairman countering that it wouldn't be legal for Trump to push him out.

Markets haven't responded favorably to Trump's meddling in the past, but given a lack of action from the Oval Office the impact has tended to be limited.

As Goldman Sachs Joseph Briggs wrote in a note Monday: "Academic studies have long flagged the benefits of central bank independence, most cleanly visualized by the historical cross-country relationship between increased independence and lower inflation."

"The available evidence from global central banks suggests that a shift toward a less independent Fed would likely result in upward inflation pressure, lower stock prices, and a weaker currency," the note added.

Briggs also analyzed the impact on the markets of Trump's tweets about the Fed during his first term, writing: "Trump’s comments were associated with lower rates, a weaker dollar, and lower equity prices, although the effects on dollar valuation and particularly equity prices are not statistically significant."

Despite the mild fluctuations that Trump's input can trigger, economists are already expecting some kickback from the Oval Office following Powell's announcement tomorrow.

As Jeremy Siegel, emeritus professor of finance at the Wharton School of the University of Pennsylvania, said during a CNBC interview Monday morning: “The attacks on Powell are going to escalate a lot" and later added: "Trump, I think, is going to step up the escalation.”

This story was originally featured on Fortune.com