WASHINGTON (AP) — The Federal Reserve kept its key rate unchanged Wednesday as it waits for additional information on how tariffs and other potential disruptions will affect the economy this year.
The Fed’s policymakers signaled they still expect to cut rates twice this year, even as they also project that President Donald Trump’s import duties will push inflation higher. They also expect growth to slow and unemployment to edge up, according to their latest quarterly projections released Wednesday.
Fed policymakers had cut their rate three times late last year but have since have been on hold. Inflation has cooled steadily since January, but Fed Chair Jerome Powell said at a news conference that tariffs are likely to reverse that progress and push inflation higher in the coming months. The Fed expects the bump to inflation will be temporary, but they want to see more data to be sure.
“Increases in tariffs this year are likely to push up prices and weigh on economic activity,” Powell said. “This is something we know is coming, we just don’t know the size of it.”
Changes to the Fed’s rate typically — though not always — influence borrowing costs for mortgages, auto loans, credit cards, and business loans.