NEW YORK (Reuters) -The Federal Reserve meeting in the coming week is set to test the U.S. stock market's sharp rebound, with investors hoping the central bank is poised to resume lowering interest rates in the months ahead.

During the rally, stocks have nearly erased the slump set off by President Donald Trump's sweeping tariffs. The S&P 500 was last down roughly 1% since April 2, when Trump's "Liberation Day" tariff announcement sent stocks plunging and led to some of the market's most volatile swings in 50 years.

While the Fed is widely projected to hold borrowing costs steady when it gives its monetary policy statement on Wednesday, market pricing indicates expectations that the central bank could cut as soon as June.

"The Fed is one of the few levers that can be pulled in a timely fashion that can support market activity," said Dominic Pappalardo, chief multi-asset strategist at Morningstar Wealth. "If they start to signal that their inflation concerns are waning, that suggests they are closer to a cut, and I think that will be well received by markets."

Trump's tariffs loom over policy decisions for central bank officials weighing concerns about a potential economic downturn against worries that tariffs will drive inflation higher.

Data this week showed the U.S. economy contracted in the first quarter for the first time since 2022, but many analysts discounted the report, saying the weakness was driven by a surge in imports as businesses sought to avoid higher costs from tariffs.

After cutting by 1 percentage point last year, the Fed has held its benchmark rate at 4.25%-4.5% so far in 2025. Fed funds futures are factoring in nearly four more 25-basis point cuts by December, according to LSEG data.

The White House has raised pressure on the central bank to cut rates, with Trump harshly criticizing Fed Chair Jerome Powell, who has said the Fed would await more data on the economy's direction before changing rates.

Last month, Trump raised the possibility he would seek to fire Powell, setting off market worries about damage to the Fed's independence. Trump later appeared to back off.

At next week's meeting, Powell "might continue to sound hawkish to push back on the narrative that the Fed is going to be influenced by the White House," said Angelo Kourkafas, senior investment strategist at Edward Jones.

Even after eight straight sessions of gains, the S&P 500 remains down about 9% from its February record high. Last month, the benchmark index dropped nearly 20% below that peak.

Corporate results reports over the past few weeks have generally exceeded expectations. With about two-thirds of the S&P 500 having reported, companies in aggregate are posting earnings 7.4% above expectations versus a long-term average of 4.3% above estimates, according to LSEG IBES.

Shares of megacaps Microsoft ( MSFT ) and Facebook parent Meta Platforms gained on Thursday after their results, boosting equity indexes. Results in the coming week include Uber Technologies ( UBER ), Walt Disney ( DIS ) and ConocoPhillips ( COP ).

Trade developments will remain in focus, with investors saying the market's rebound came on optimism that tensions were easing and that deals with other countries were progressing. Trump on April 9 paused hefty import levies on many countries for 90 days, as the U.S. negotiates with other countries. That move sent stocks soaring.

"The market wants to see, and expects to see, some solid signed deals with some of our trading partners," said Scott Wren, senior global market strategist at the Wells Fargo Investment Institute.

"The market is anticipating something, and it's time for the rubber to hit the road."