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.

So far inflation has continued to decline while some cracks have appeared in the economy, particularly in housing, where elevated borrowing costs are slowing sales and homebuilding. Hiring has also slowed. Such trends would typically lead the Fed to reduce its key rate, which is currently at about 4.3%.

Yet Powell said the economy remains in good shape and the Fed has to consider the potential for prices to rise soon.

“You can see perhaps a very, very slow continued cooling” in the job market, “but nothing that’s troubling at this time,” he said.

“We have to be forward looking,” Powell said later. “We expect a meaningful amount of inflation to arrive in coming months and we have to take that into account.”

Powell also said the Fed will learn much more over the summer about how tariffs will affect the economy. George Pearkes, global macro strategist for Bespoke Investment Group, said he interpreted that to mean the Fed won’t cut until September, at the earliest. Its next meeting is in July.

“Unless we see a really, really rapid deterioration in the labor market we won’t see a cut until September, and maybe not even then,” he said.

Wall Street investors currently expect the Fed to cut in September, according to futures prices tracked by CME Fedwatch.

Fed officials see inflation, according to their preferred measure, rising to 3% by the end of this year, from 2.1% in April, according to the projections released Wednesday. They also project the unemployment rate will rise to 4.5%, from 4.2% currently. Growth is expected to slow to just 1.4% this year, down from 2.5% last year.

Claudia Sahm, chief economist at New Century Advisors and a former Fed economist, said that the projections show that policymakers do expect inflation to come down in 2026 and 2027, with the tariffs having just a temporary impact. Without the duties, officials would be more likely to cut rates soon, she said.

“The Fed seems to be in agreement that this will be temporary, but they don’t have high enough conviction yet,” she said.

So far, inflation has cooled this year to just 2.1% in April, essentially back at the central bank’s target of 2%. Core inflation, which excludes the volatile food and energy categories, remains elevated at 2.5%.

Trump has pointed to the mild inflation figures to argue that the Fed should lower borrowing costs and has repeatedly criticized Powell for not doing so. On Wednesday he called Powell “stupid” and accused him of being “political” for not cutting rates.

“So we have no inflation, we have only success,” Trump said, before the Fed announced its decision. “And I’d like to see interest rates get down.”

Trump has previously argued that a rate cut would boost the economy. Now his focus has shifted to the federal government’s borrowing costs, which have shot higher since the pandemic, with interest payments running at an annual rate of more than $1 trillion.

Pushing the Fed to cut rates simply to save the government on its interest payments typically raises alarms among economists, because it would threaten the Fed’s congressional mandate to focus on stable prices and maximum employment.

One of Trump’s complaints is that the Fed isn’t cutting rates even as other central banks around the world have reduced their borrowing costs, including in Europe, Canada, and the U.K. On Tuesday, the Bank of Japan kept its key short-term rate unchanged at 0.5%, after actually raising it recently.

But the European Central Bank, Bank of Canada, and Bank of England have reduced their rates this year in part because U.S. tariffs are weakening their economies. So far the U.S. economy is mostly solid, with the unemployment rate low.

The Bank of England has cut its rate twice this year but is expected to keep it unchanged at 4.25% when it meets Thursday.