WASHINGTON — The Federal Reserve held interest rates steady Wednesday as expected, but new projections released alongside the decision showed officials are extremely divided about how significantly they will be able to lower borrowing costs this year as they brace for inflation to rise sharply as growth tumbles.

The central bank paused interest rate reductions in January following a series of cuts in late 2024 that lowered borrowing costs by 1 percentage point. In the months since, officials have maintained a “wait-and-see” stance, seeking greater clarity on how President Donald Trump’s policies will affect the economy before making any major policy moves.

Wednesday’s unanimous decision, which kept interest rates at a range of 4.25% to 4.5%, shows that this approach still holds at a time when there is still vast uncertainty about which countries will be tariffed and at what rate; how expansive the administration’s immigration crackdown will be; and whether Republicans will be able to slash taxes and cut spending as their bill making its way through Congress intends.

The Fed now must also contend with an escalating conflict between Israel and Iran, which has further clouded the economic outlook.

Still, the Fed said in a statement Wednesday that uncertainty about the economic outlook had “diminished but remains elevated.”

New projections released Wednesday show that some officials still see a path to lower interest rates this year despite a higher risk of a stagflationary shock, in which inflation accelerates as growth turns sluggish. But many do not, teeing up a potential clash among policymakers in future rate decisions.

Nine of the 19 policymakers penciled in fewer cuts this year, with seven forecasting no more reductions and two predicting just one quarter-point move.

The forecasts suggest the Fed will remain at odds with Trump, who has demanded significantly lower interest rates from the central bank. The president has for months pressured the central bank to reduce borrowing costs, repeatedly lambasting Jerome Powell, the Fed chair, and at one point raising the prospects of terminating him before his leadership term is up in May 2026.

Trump revived those attacks as recently as Wednesday, just hours before the Fed’s rate decision. He repeatedly called Powell “stupid” and floated the idea of installing himself as chair of the central bank as he called for borrowing costs to drop by 2.5 percentage points. That is significantly more than what policymakers at the Fed suggest is appropriate.

By the end of 2026, most officials expected interest rates to decline to a range of 3.5% to 3.75%, less than what was projected in March. Officials maintained that over a longer time horizon, the so-called neutral rate, which neither speeds up nor slows down demand, had steadied at 3%.

Policymakers at the Fed now expect the economy to grow only 1.4% this year, down from 1.7% in March. They also predict unemployment to rise to 4.5%, higher than their estimates three months ago and above the current 4.2% rate.

Officials simultaneously lifted their year-end forecast for “core” inflation, which strips out volatile food and energy prices and is seen as the most accurate gauge of underlying price pressures, to 3.1%. That is up from 2.8% in March and 2.5% in December.

The forecasts underscore how significantly Trump has upended the economic outlook since his return to the White House. Recent data, which does not yet reflect the full effects of the president’s policies, suggested that the Fed was close to having in hand an elusive “soft landing,” in which it tamed inflation after a surge following the pandemic without tanking the economy.

Overall inflation has stayed muted in recent months, even as the core measure has proved slightly stickier, and it is now within spitting distance of the Fed’s long-standing 2% target. Many companies have held off passing along price increases to their customers and are still working through stockpiles of inventory they amassed earlier this year to avoid the higher costs associated with the tariffs.

The labor market has cooled off as employers have scaled back on hiring and fewer Americans enter the workforce. Claims for unemployment benefits have started to creep up, but layoffs overall remain low, helping to keep the unemployment rate remarkably stable around 4.2%.

This relatively benign backdrop has given the Fed confidence that it can afford to be patient before taking any action on interest rates. If the central bank moves too quickly to lower interest rates, it risks inflaming inflationary pressures that are already poised to flare back up because of Trump’s tariffs. On the flip side, if it waits too long to cut, it could cause undue economic damage.

With such high stakes, officials have signaled that they want to have tangible evidence on which way the economy is breaking before making any big decisions. That suggests the Fed’s wait-and-see approach will endure throughout the summer, postponing until September at the earliest what is likely to be an intense debate about the path forward for borrowing costs.