The Fed chief refused to be pinned down on when officials may hike again, citing a raft of economic reports due before the Fed's next meeting in September, including two jobs reports, two reports on consumer-price inflation, and data on employment costs.

"All of that information is going to inform our decision as we go into that meeting," he said. "It is certainly possible that we would raise [rates] again at the September meeting, if the data warranted. And I would also say it's possible that we would choose to hold steady at that meeting."

Markets took the decision in stride. As Powell spoke, stocks advanced while Treasury yields and the dollar fell. Swaps traders held fairly steady on the probability that the Fed will hike rates by an additional quarter point before year's end. Their pricing implies just slightly over a 50 percent chance of another bump higher before the Fed tightening cycle ends.

"The default at this point is that the Fed is going to go again—at least once more," said Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets. "But the timing is open and will depend on the data. He emphasized yet again that the Fed is taking things on a meeting-by-meeting basis."

Since early last year, the Fed has engaged in the most aggressive tightening campaign since the 1980s in an effort to curb inflation, which in 2022 hit a 40-year high. While policymakers paused rate hikes last month to assess the impact of previous moves, they also signaled at the time that two more increases would probably be appropriate by the end of the year.

What Bloomberg Economists Say…

"While the lack of substantive changes to the policy statement suggests the majority of officials still want to keep the door open for another rate hike, Chair Jerome Powell's somewhat dovish performance at the post-meeting news conference suggests a willingness to skip a hike at the September meeting, provided inflation data continue to be soft."

— Anna Wong, chief U.S. economist

The latest hike was widely anticipated after recent reports showed an economy that has largely withstood higher interest rates so far. But ahead of Wednesday's decision, investors saw a second increase as less certain, in part because of data on consumer prices showing inflation receded sharply last month.

The central bank's Federal Open Market Committee (FOMC) said it will "continue to assess additional information" in a statement after the meeting that was almost identical to its statement in June.

Officials will be looking for moderate growth, cooling inflation, and supply and demand coming into better balance, particularly in the labor market, as they assess whether and when to raise rates again, Powell said.

"What our eyes are telling us is policy has not been restrictive enough for long enough to have its full desired effects," he said. "We intend again to keep policy restrictive until we're confident that inflation is coming down sustainably to our 2 percent target, and we're prepared to further tighten if that is appropriate. We think the process still probably has a long way to go."

In its statement Wednesday, the FOMC repeated its description of inflation as "elevated" and upgraded its description of economic growth to "moderate" from "modest." It reiterated that the banking sector is "sound and resilient," while cautioning that credit tightening is expected to weigh on the economy following the failures of three U.S. regional banks earlier this year.

While June's consumer-price report showed inflation decelerating to 3 percent, from last year's 9.1 percent peak, policymakers have expressed concern about so-called "core" inflation, excluding food and energy, which has been slower to come down. They have singled out service-sector inflation in particular as a category they believe remains elevated due to tight labor markets.

Fed officials have also been surprised by the resilience of economic growth. Forecasters expect a quarterly report on gross domestic product, due Thursday, to show the U.S. economy expanded by an annualized 1.8 percent in the April-to-June period. Some Wall Street economists have pushed back expectations of a recession this year in light of the ongoing strength in economic activity alongside receding price pressures.

Powell said Wednesday that Fed staff economists are no longer forecasting a recession in 2023, given the resilience of the economy recently, but are still anticipating a noticeable slowdown in growth starting later this year.

"The data justified a move up in the funds rate, given growth was stronger than expected and the labor market continues to be strong," said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. "They didn't want to back off from hiking based on one better inflation reading. They need to see a sustained easing in price pressures."

The FOMC next meets on September 19 and 20, and subsequently on October 31 and November 1. Powell will also have an opportunity to clarify the central bank's view on the future path of rates at the Kansas City Fed's annual symposium in Jackson Hole, Wyoming, in late August.

—With assistance from Chris Middleton & Liz Capo McCormick.

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