The Federal Reserve left interest rates unchanged on Wednesday and reiterated plans to hold rates steady, noting there has been a lack of further progress on inflation returning to its 2% target.

But Fed Chair Jay Powell soothed markets by making it clear in a press conference Wednesday afternoon that "it is unlikely the next policy move will be a hike."

The central bank voted to keep its benchmark interest rate in a range of 5.25%-5.50%, a 23-year high, at the conclusion of its two-day policy meeting. The fed funds rate has been in this range since July 2023.

In a policy statement, Fed officials said, "In recent months, there has been a lack of further progress towards the committee’s 2% inflation objective." Officials reiterated more clarity in the outlook for inflation returning to target will be needed before cutting rates.

"The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent," the statement read.

Read more: What the Fed rate decision means for bank accounts, CDs, loans, and credit cards

In his March press conference, Powell suggested it would be appropriate for the Fed to cut rates "at some point" this year.

In its statement Wednesday, the Fed said "risks to achieving its employment and inflation goals have moved toward better balance over the past year." The FOMC characterized the economic outlook as "uncertain."

Since issuing forecasts in March that three interest rates of 0.25% each could be warranted this year, Fed officials have publicly muddied the outlook.

Powell in his press conference Wednesday declined to say whether three rate cuts — the median estimate of Fed officials in March — were still an expectation for 2024.

Instead he reiterated that it will now take longer than expected for the Fed to reach the confidence that inflation is moving sustainably down to 2% and "I don’t know how long it will take."

"When we get that confidence, rate cuts will be in scope."

Powell also made the case that monetary policy is positioned "to address different paths the economy might take," one of which involves no cuts.

If inflation remains sticky and the labor market strong, "that would be a case where it would be appropriate to hold off on rate cuts."

On the other hand, if policymakers were to become more confident inflation is moving sustainably down to 2% or if the labor market were to unexpectedly weaken, those scenarios could build the case to reduce rates, he said.

"There are paths to not cutting and there are paths to cutting," he added.

Powell downplayed concerns that the economy may be sliding into a period of "stagflation," which is marked by slow growth and stubbornly high inflation. Powell noted he was "around" for such a period in the 1970s, and he dismissed any similarities in today's economy.

"I don't see the 'stag' or the 'flation,'" he said.

The central bank will release an updated set of economic projections at the conclusion of its policy meeting next month.

Separately, the Fed on Wednesday announced changes to its program for reducing the size of its balance sheet.

Beginning June 1, the Fed will slow the pace of Treasurys rolling off its balance sheet on a monthly basis to $25 billion from $60 billion and maintain the cap on mortgage-backed securities rolling off at $35 billion a month. The central bank will reinvest any principal payments in excess of this cap into Treasury securities.

The decision to taper the pace of the balance sheet runoff comes as officials seek to avoid any disruptions to the plumbing of financial markets like that which disrupted markets back in 2019. The Fed has said the balance sheet is separate from setting interest rates.

The decision to hold rates at current levels comes on the heels of three straight months of higher-than-expected inflation readings.

The Fed’s preferred inflation gauge, the “core” Personal Consumption Expenditures index, which excludes volatile food and energy prices, rose at a clip of 2.8% year over year in March.

This was the same annual increase seen in February and a tenth of a percent higher than expected. The three-month annualized reading on core PCE jumped to 4.4%, more than double the Fed's target.

In its statement on Wednesday, the central bank said, "The Committee is strongly committed to returning inflation to its 2 percent objective."

The decision was unanimous.

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