The major US stock indexes have backed off record highs ahead of the Federal Reserve's all-important March meeting.

On Wednesday, that tension will finally be resolved.

The US central bank is set to release its latest monetary policy decision and updated economic projections at 2:00 p.m. ET on Wednesday afternoon, with investors looking for an answer to one key question: Does the Fed still think it will cut rates three times in 2024?

Recent data showing inflation hasn't dropped as fast as expected has pushed out market forecasts for Fed rate cuts this year to three from six. The question, then, is whether a few months of stubborn inflation data will be enough to prompt a further tweak from the Fed.

Read more: What the Fed rate decision means for bank accounts, CDs, loans, and credit cards

Elsewhere on the calendar this week, Nike (NKE), Lululemon (LULU), FedEx (FDX), and Micron (MU) are all set to report results on Thursday, highlighting what should otherwise be a relatively quiet schedule for corporate results. On the IPO front, Reddit is set to make its public market debut on Thursday under the ticker 'RDDT' as investors continue to gauge how much last year's frozen market for new issues has thawed in 2024.

Nvidia (NVDA) will also host its annual GTC conference on Monday, with investors keenly focused on the company's product roadmap as it rides a massive surge in demand for its chips amid the AI boom.

The stock is up more than 260% over the last year, though shares have been roughly flat over the last two weeks, with investors in a holding pattern ahead of both this event and the Fed's meeting this week.

Fed in focus

Investors aren't contemplating any change in the Fed's benchmark interest rates, which should remain in the range of 5.25%-5.50%, where they've stood since last July.

This means investors will have their full attention both on the Fed's latest Summary of Economic Projections (SEP) and, as ever, Fed Chair Jerome Powell's press conference, which will kick off 30 minutes after the SEP and policy statement are released.

Deutsche Bank chief US economist Matthew Luzzetti wrote in a note to clients on Friday that he believes the recent inflation readings will prompt the Fed to lean "hawkish" with its messaging on Wednesday.

In other words, don't expect the Fed to spend much time pushing back against market expectations they're content to wait before cutting rates this year.

"Chair Powell's press conference should emphasize that, while officials still have confidence that inflation is on the desired path, realization of softer inflation prints over the coming months is a necessary condition to begin easing," Luzzetti said.

Coming out of the Fed's December meeting, investors talked about the possibility of a January rate cut, with March seen as all but a formality. Ahead of this week's meeting, data from the CME Group showed rate cuts aren't viewed as having greater than a 50% likelihood until July.

A market dip from the dots?

In December, part of the SEP known as the "dot plot," which maps out policymakers' expectations for where interest rates could be headed in the future, showed officials anticipate three interest rate cuts this year.

Bank of America US economist Michael Gapen wrote in a note to clients that any changes to that forecast will be "the biggest focus for markets" on Wednesday.

Economists have noted that it would take just two officials seeing higher rates than the last release to push the consensus to just two rate cuts this year.

Given markets have moved higher on the prospect of the Fed cutting rates this year, a shift to fewer rate cuts could be considered a threat to the market rally. But some argue that shouldn't matter.

Renaissance Macro's head of economic research Neil Dutta wrote in a note to clients this week, for instance, that he's "skeptical" markets would move much if the Fed projects one less rate cut this year.

Dutta argued that if the Fed removes a projected interest rate cut this year, it would likely come alongside an upward revision to economic growth. "The erasure of a cut in 2024 will mean little for the equity market, it's a benign event," Dutta wrote. "Ultimately, a stronger nominal growth outlook implies a stronger earnings outlook."

Bank of America US and Canada equity strategist Ohsung Kwon offered a similar opinion when recently asked by Yahoo Finance if the Fed poses a risk to the firm's new call for the S&P 500 to reach 5,400 by the end of this year as a result of stronger corporate earnings.

"If the Fed chooses not to cut, then I think it's going to be because the economy is too hot," Kwon said. "I don't think that earnings come in lower because the Fed doesn't cut if the economy is too hot."

The risk for corporates would be in refinancing debt, Kwon said. But with 75% of the S&P 500's debt already being long-term at fixed rates, the impact of higher rates there would be limited for the large cap index.

Weekly calendar

Monday

Economic news: New York Fed Services Business activity, March (-7.3 previously); NAHB housing market index, March (48 expected, 48 previously)

Earnings: No notable earnings.

Tuesday

Economic news: Building permits month-over-month, February (+2% expected, -0.3% previously); Housing starts, month-over-month, February (+7.4% expected, -14.8% previously)

Earnings: XPeng (XPEV)

Wednesday

Economic news: FOMC rate decision; MBA mortgage applications, week ending March 15 (7.1% previously)

Earnings: Chewy (CHWY), Five Below (FIVE), General Mills (GIS), Guess (GES), KB Home (KBH), Micron (MU)

Thursday

Economic news: Philadelphia Fed business outlook, March (-1.3 expected, 5.2 previously); Initial jobless claims, week ending March 16 (215,000 expected, 209,000 previously); S&P US manufacturing PMI, March (51.8 expected, 52.2 previously); S&P Global US services PMI, March (52.0 expected, 52.3 previously); S&P US composite PMI, March (52.5 previously); Leading index, February (-0.2% expected, -0.4% previously); Existing home sales, February, month-over-month (-1.6% expected, 3.1% previously)

Earnings: Accenture (ACN), Academy Sports + Outdoors (ASO), Darden Restaurants (DRI), FactSet (FDS), FedEx (FDX), Lululemon (LULU), Nike (NKE)

Friday

Economic news: No notable economic data.

Earnings: No notable earnings.

Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.

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