Federal Reserve keeps interest rate unchanged, sees slower growth, slightly higher inflation ahead

WASHINGTON (AP) — The Federal Reserve kept its benchmark interest rate unchanged Wednesday and signaled that it still expects to cut rates twice this year, though more policymakers forecast fewer cuts.

The Fed also now expects the economy to grow more slowly this year and next than it did three months ago, according to a set of quarterly economic projections also released Wednesday. It also expects the unemployment rate to tick higher, to 4.4%. Policymakers also expect inflation will pick up slightly by the end of this year, to 2.7% from its current level of 2.5%. Bother are above the central bank’s 2% target.

“Uncertainty around the economic outlook has increased,” the Fed said in a statement released after its two-day meeting .

The projections underscore the tight spot the Fed may find itself in this year: Higher inflation typically would lead the Fed to keep its key rate elevated, or even raise rates. On the other hand, slower growth and higher unemployment would often cause the Fed to cut rates to spur more borrowing and spending and lift the economy.

It is the second meeting in a row that the Fed has kept its interest rate at about 4.3% as the central bank has moved to the sidelines as it evaluates the impact of the Trump administration’s policies on the economy. Economists forecast that tariffs will likely push up inflation, at least temporarily. But other policies, such as deregulation, could lower costs and cool inflation.