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The US Federal Reserve kept interest rates unchanged Wednesday as expected, in defiance of President Donald Trump as the world’s largest economy battles stubborn inflation, weak labor demand and an “uncertain” outlook due to the war in Iran.

The Fed’s 11-1 vote kept rates steady at a range between 3.50 percent and 3.75 percent, with officials flagging one expected rate cut by the end of the year.

“The implications of developments in the Middle East for the US economy are uncertain,” the Fed said in a statement.

The bank cut rates three consecutive times late last year before holding them steady at its January meeting.

It has a dual mandate of maintaining inflation near a long-term target of two percent while ensuring maximum employment.

With war in the Middle East causing global oil prices to spike, potentially fueling inflation and curbing growth, analysts say policymakers were always unlikely to make any immediate moves.

Affordability has been a key political issue for Trump, who has repeatedly called for rates to be slashed even as prices have remained stubbornly high.

“Uncertainty about the economic outlook remains elevated,” the Fed said Wednesday, while noting that economic activity was “expanding at a solid pace.”

“Job gains have remained low, and the unemployment rate has been little changed in recent months. Inflation remains somewhat elevated.”

The US central bank also released its quarterly summary of economic projections, expecting year-end fourth quarter GDP growth to come in at 2.4 percent year-on-year.

The Fed raised its inflation outlook as well, expecting PCE (personal consumption expenditures) inflation at year-end to come in at 2.7 percent, up from an earlier estimate of 2.4 percent. 

The knock-on effects of the war, particularly of oil supply shocks, have dominated headlines since US-Israel strikes on Iran on February 28.

Central banks tend to ignore the inflation effects of short-term price shocks, but it is unclear how long this conflict will last.

Before the war, a rate cut was expected as soon as in the summer, with another possible later in the year.

The Fed on Wednesday said it still expected one rate reduction by year-end.

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© Agence France-Presse