The Federal Reserve is keeping its key interest rate unchanged while warning that tariffs are likely to raise inflation this year. Fed Chairman Jerome Powell announced that the central bank expects to cut rates twice later in 2025, even as inflation remains stubbornly above target levels.

In its latest economic predictions, the Fed downgraded growth expectations, forecasting a slowdown to just 1.7 percent in 2025. That’s down from 2.8 percent last year. Inflation is expected to edge up slightly to 2.7 percent by the end of the year, exceeding the Fed’s goal.

Powell highlighted that President Donald Trump’s tariffs are starting to impact prices, potentially delaying progress in reducing inflation. He acknowledged rising concerns among businesses and consumers about the economy but noted that employment remains low and economic expansion continues.

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