The US Federal Reserve has raised its inflation forecasts for the world’s largest economy after Donald Trump launched his war with Iran.

US inflation expectations for this year were increased to 2.7pc by the Federal Open Markets Committee (FOMC), up from 2.4pc in December before the conflict in the Middle East began.

America’s central bank also voted to hold interest rates at 3.75pc as soaring energy prices stoke fears of a new wave of higher prices.

However, the Fed said the implications of war in the Middle East for the US economy were still “uncertain”.

It also pledged to cut rates once this year, and once next year – despite fears the US-Iran war will trigger higher prices and the need to slash borrowing rates.

The price of Brent crude rose by 4pc to nearly $108 per barrel on Wednesday after Iran threatened to attack Gulf energy facilities. Oil prices have now climbed by 48pc since the war began in late February.

US petrol pump prices have also soared by 31pc in the last month to $3.84 per gallon, according to AAA.

In the wake of the higher energy prices, Fed officials also raised their inflation expectations for 2027 to 2.2pc, up from 2.1pc in December and further above the Fed’s 2pc target.

However, the FOMC raised their expectations for US GDP growth this year from 2.3pc to 2.4pc, and from 2pc to 2.3pc in 2027.

Their unemployment forecast for this year remained unchanged at 4.4pc.

There was one dissent against the FOMC’s vote to keep rates on hold. Governor Stephen Miran voted for a 0.25 percentage point cut.

Jerome Powell, the Federal Reserve chairman, has faced enormous pressure from Mr Trump, who has made repeated demands for the Fed to cut interest rates and has threatened to sack the Fed chairman.

Mr Trump has called Mr Powell a “numbskull” and a “moron” for not slashing rates, which he said in a Truth Social post last week should be cut “IMMEDIATELY”, despite new inflation warnings.

In January, the US Department of Justice opened a criminal investigation into Mr Powell in an unprecedented move that the Fed chairman claimed was a “pretext” to restrict the central bank’s independence.

The investigation was blocked last week by a federal judge who said there was a “mountain of evidence” that it was designed to pressure the central bank to cut interest rates.

Mr Trump could soon have more scope to influence the central bank after Mr Powell’s term as Fed chairman expires in mid-May. This is his second to last FOMC meeting.

The president has nominated Kevin Warsh, a former Fed governor and Wall Street veteran, to replace Mr Powell as chairman from May.

Mr Powell has not yet announced whether he intends to stay on the Fed board after his term as chairman expires.

Try full access to The Telegraph free today. Unlock their award-winning website and essential news app, plus useful tools and expert guides for your money, health and holidays.