WASHINGTON (AP) — The Federal Reserve kept its benchmark interest rate unchanged Wednesday and signaled that it still expects to cut rates twice this year even as it sees inflation staying stubbornly elevated.
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 forecasts growth falling to just 1.7% in 2025, down from 2.8% last year, and 1.8% in 2026. Policymakers also expect inflation will pick up slightly, to 2.7% by the end of this year from its current level of 2.5%. Both are above the central bank’s 2% target.
Even though the Fed maintained its forecast for two cuts, economists noted that under the surface there were signs that the central bank could stay on hold for some time. That is likely to keep borrowing costs for mortgages, auto loans, and credit cards unchanged in the coming months.
Eight of the 19 Fed officials said they see only one or zero rate reductions this year, up from just four in December.
“It will be harder for them to cut rates this year with inflation moving sideways,” said Michael Gapen, an economist at Morgan Stanley.
Fed Chair Jerome Powell, at a news conference, said that President Donald Trump's tariffs have started to push up inflation and would likely stall the progress the central bank has seen in reducing inflation since its peak in 2022.
“I think we were getting closer and closer" to price stability, Powell said. "I wouldn’t say we were at that. ... I do think with the arrival of the tariff inflation, further progress may be delayed.”
On his Truth Social platform late Wednesday, Trump posted: “The Fed would be MUCH better off CUTTING RATES as U.S. Tariffs start to transition (ease!) their way into the economy. Do the right thing.”
Powell added that the Fed still expects inflation to get back to nearly 2% by the end of next year. Tariffs could just create a one-time increase in prices, he said, rather than an ongoing boost to inflation. And in some cases, the Fed can simply “look through” a temporary price rise, rather than respond by raising rates, Powell added.
Those comments appeared to please investors, and the S&P 500 stock index rose 1% Wednesday afternoon.
Luke Tilley, chief economist at Wilmington Trust, said Powell appeared less alarmed about the impact of tariffs compared to the Fed's previous meeting in January.
“They're talking about tariffs in a totally different way,” he said.
Powell acknowledged that the Fed initially thought inflation coming out of the pandemic would be temporary, which led it to delay raising rates to combat higher prices. But he added that in this case, it could be a “different situation.”
“But...we really can’t know that," he added, noting that uncertainty is enveloping the economy. "We’re going to have to see how things actually work out.”
Fed policymakers also expect the unemployment rate to tick higher, to 4.4%, by the end of this year, from 4.1% now.
The economic 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.
Powell acknowledged that many surveys of businesses and consumers have shown rising concern about the economic outlook. Yet he noted that the unemployment rate remains low and the economy is still expanding.
“We do understand that sentiment has fallen off pretty sharply but economic activity has not yet," Powell said. “The economy seems to be healthy.”
Powell underscored that uncertainty around the economy's outlook is “unusually elevated” and said that the Fed is prepared to be patient and see how the economy evolves before making further moves.
“We’re not going to be in any hurry to move,” he said. "We’re well positioned to wait for further clarity and not in any hurry.”
The Fed also said it would slow the rate at which it is reducing its Treasury holdings, which grew massively during and after the pandemic. Previously it had allowed $25 billion of Treasurys to mature each month without reinvesting the proceeds. Now it will allow only $5 billion to mature each month.
In effect, the Fed will be reinvesting more of the expiring bonds into new securities, which should keep interest rates on long-term Treasurys lower than they would have been otherwise. Powell characterized the change as a technical one and not related to its interest-rate policies. Yields fell slightly in Treasury markets.
Federal Reserve governor Christopher Waller voted against the decision to slow the Treasury purchases. The Fed is still allowing $35 billion of mortgage-backed securities to mature each month.
Fed officials are closely watching measures of Americans’ inflation expectations, which spiked in one survey released just last week. Inflation expectations — essentially a measure of how worried people are that inflation will get worse — are important to the Fed because they can be self-fulfilling. If people expect higher inflation, they may take steps, such as accelerating purchases, that can push prices higher.
Yet Powell, in his news conference, downplayed that increase as an “outlier” and said that in the long run, Americans still appear to expect inflation to stay in check.
Retailers of both high-end and lower-cost goods have warned that consumers are turning more cautious as they expect prices to rise because of tariffs. Retail sales rose modestly last month after a sharp fall in January. Homebuilders and contractors expect that home construction and renovations will get more expensive.
AP Business Writer Alex Veiga in Los Angeles contributed to this report.
Federal Reserve Chair Jerome Powell speaks during a news conference after the Federal Open Market Committee meeting, Wednesday, March 19, 2025, at the Federal Reserve in Washington. (AP Photo/Jacquelyn Martin)
A key adviser warned President John F. Kennedy after the disastrous Bay of Pigs invasion of Cuba in 1961 that the agency behind it, the CIA, had grown too powerful. He proposed giving the State Department control of “all clandestine activities” and breaking up the CIA.
The page of Special Assistant Arthur Schlesinger Jr.'s memo outlining the proposal was among the newly public material in documents related to Kennedy's assassination released this week by the U.S. National Archives and Records Administration. So, too was Schlesinger's statement that 47% of the political officers in U.S. embassies were controlled by the CIA.
Some readers of the previously withheld material in Schlesinger's 15-page memo view it as evidence of both mistrust between Kennedy and the CIA and a reason the CIA at least would not make Kennedy's security a high priority ahead of his assassination in Dallas on Nov. 22, 1963. That gave fresh attention Thursday to a decades-old theory about who killed JFK — that the CIA had a hand in it.
Some Kennedy scholars, historians and writers said they haven't yet seen anything in the 63,000 pages of material released under an order from President Donald Trump that undercuts the conclusion that Lee Harvey Oswald, a 24-year-old Marine and onetime defector to the Soviet Union, was a lone gunman. But they also say they understand why doubters gravitate toward the theory.
“You have this young, charismatic president with so much potential for the future, and on the other side of the scale, you have this 24-year-old waif, Oswald, and it doesn't balance. You want to put something weightier on the Oswald side,” said Gerald Posner, whose book, “Case Closed,” details the evidence that Oswald was a lone gunman.
Critics of the Oswald-acted-alone conclusion had predicted that previously unreleased material would bolster their positions. One of them, Jefferson Morley, the editor of the JFK Facts blog, said Thursday that newly public material is important to “the JFK case.” Morley is vice president of the Mary Ferrell Foundation, a repository for files related to the assassination.
Morley said that even with the release of 63,000 pages this week, there is still more unreleased material, including 2,400 files that the FBI said it discovered after Trump issued his order in January and material held by the Kennedy family.
Kennedy was killed on a visit to Dallas, when his motorcade was finishing its parade route downtown and shots rang out from the Texas School Book Depository building. Police arrested Oswald, who had positioned himself from a sniper’s perch on the sixth floor. Two days later Jack Ruby, a nightclub owner, fatally shot Oswald during a jail transfer broadcast live on television.
“It was the first big event that led to a series of events involving conspiracy theories that have left Americans believing, almost permanently, that their government lies to them so often they shouldn’t pay close attention,” said Larry Sabato, director of the University of Virginia Center for Politics and author of “The Kennedy Half-Century"
Morley said Schlesinger's memo provides the “origin story” of mutual mistrust between Kennedy and the CIA.
Kennedy had inherited the Bay of Pigs plan from his predecessor, President Dwight Eisenhower, and had been in office less than three months when the operation launched in April 1961 as a covert invasion to topple Cuban leader Fidel Castro. Schlesinger's memo was dated June 30, 1961, a little more than two months later.
Schlesinger told Kennedy that all covert operations should be cleared with the U.S. State Department instead of allowing the CIA to largely present proposed operations almost as accomplished tasks. He also said in some places, such as Austria and Chile, far more than half the embassies' political officers were CIA-controlled.
Ronald Neumann, former US ambassador to Afghanistan, Algeria and Bahrain, said most American diplomats now are “non-CIA,” and in most places, ambassadors do not automatically defer to the CIA.
“CIA station chiefs also have an important function for ambassadors, because the station chief is usually the senior intelligence officer at a post," Neumann said, adding that ambassadors see a CIA station chiefs as providing valuable information.
But he noted: “If you get into the areas where we were involved in covert operations in supporting wars, you’re going to have a different picture. You’re going to have a picture which will differ from a normal embassy and normal operations.”
Schlesinger's memo ends with a previously redacted page that spells out a proposal to give control of covert activities to the State Department and to split the CIA into two agencies reporting to separate undersecretaries of state. Morley sees it as a response to Kennedy's anger over the Bay of Pigs and something Kennedy was seriously contemplating.
The plan never came to fruition.
Sabato said that Kennedy simply “needed the CIA” in the Cold War conflict with the Soviet Union and its allies like Cuba, and a huge reorganization would have hindered intelligence operations. He also said the president and his brother, U.S. Attorney General Robert F. Kennedy, wanted to oust Castro before JFK ran for reelection in 1964.
“Let’s remember that a good percentage of the covert operations were aimed at Fidel Castro in Cuba,” Sabato said.
Timothy Naftali, an adjunct professor at Columbia University who is writing a book about JFK’s presidency, discounts the idea of tensions between the president and the CIA lasting until Kennedy's death. For one thing, he said, the president used covert operations “avidly.”
“I find that the more details we get on that period, the more it appears likely that the Kennedy brothers were in control of the intelligence community,” Naftali said. “You can you can see his imprint. You can see that there is a system by which he is directing the intelligence community. It's not always direct, but he’s directing it.”
Associated Press writer David Collins in Hartford Connecticut, contributed to this report.
FILE - Secret servicemen standing on running boards follow the presidential limousine carrying President John F. Kennedy, right, rear seat, and first lady Jacqueline Kennedy, left, as well as Texas Gov. John Connally and his wife, Nellie, in Dallas, Texas, Nov. 22, 1963. (AP Photo/Jim Altgens, File)
FILE - In this Nov. 22, 1963 file photo, the limousine carrying mortally wounded President John F. Kennedy races toward the hospital seconds after he was shot in Dallas. (AP Photo/Justin Newman, File)
FILE - Arthur Schlesinger Jr., Harvard University historian and President John F. Kennedy's former personal assistant, holds a brief lecture as his book "A Thousand Days: John F. Kennedy in the White House" was presented to Italian public on Jan. 24, 1966 in Rome. Sitting at left is Italian journalist and author Luigi Barzini Jr. who introduced Schlesinger to the audience. (AP Photo/Gianni Foggia, File)
FILE - This Nov. 22, 1963 file photo shows President John F. Kennedy riding in motorcade with first lady Jacqueline Kenndy in Dallas, Texas. (AP Photo, file)
