The Federal Reserve held interest rates steady Wednesday, while signaling it expects to be able to cut rates only once this year.
The decision and the rate cut projections came hours after the Labor Department reported a modest — but welcome — easing in the inflation rate last month.
The Fed has kept its benchmark interest rate at the highest level in over two decades since last July.
Fed policymakers still expect to cut rates later this year. But forecasts released at the end of their two-day meeting show on average, policymakers anticipate just one quarter-point rate cut by year’s end — down from the three rate cuts they were forecasting in March.
The Fed has been prevented from cutting rates more aggressively because inflation has proven to be more stubborn than expected. Policymakers want more evidence that inflation is falling back towards their target of 2% before they start lowering rates.
The latest cost-of-living report, also released Wednesday, offers some encouraging signs that inflation is moving in that direction.
Consumer prices in May were 3.3% higher than a year ago — a smaller annual increase than the previous month. The consumer price index was flat between April and May, as falling gasoline prices helped to offset rising rents and restaurant prices.