"There's a lot of movement on the services side and it's going to take a little bit of time. I do believe we are on the right path here."

Quantitative tightening is "an underappreciated risk" that might keep bond yields higher for longer. Auctions of 10- and 30-year Treasuries were poorly received this month, and supply will keep increasing, thanks to the widening budget deficit.

But the prospect of a future rate hike is still on the table.

The debate is shifting from how high rates need to go to how long they should stay elevated.

But Chairman Powell says nearly all officials expect "somewhat further" increases, whether in July or beyond.

January's personal consumption expenditures (PCE) price index came in hotter than expected today, rising 5.4% from a year earlier vs. a 5% increase in December.

Even as they initiated another big rate hike, Fed officials signaled they might be entering the final phase of their aggressive campaign to curb inflation.

Persistent high inflation may lead the Fed to keep up the regular rate hikes till the fed funds rate reaches 5.5%.