Federal Reserve officials maintained their outlook for three interest-rate cuts this year and moved toward slowing the pace of reducing their bond holdings, suggesting they aren’t alarmed by a recent uptick in inflation.

Officials decided unanimously to leave the benchmark federal funds rate in a range of 5.25% to 5.5%, the highest since 2001, for a fifth straight meeting. Policymakers signaled they remain on track to cut rates this year for the first time since March 2020, but they now see just three reductions in 2025, down from four forecast in December, based on the median projection.

Chair Jerome Powell, speaking to reporters after the Fed’s decision Wednesday, demurred when asked whether officials would lower rates at their coming meetings in May or June, repeating that the first reduction would likely be “at some point this year.”

He largely shrugged off recent data showing an uptick in inflation in recent months, saying, “It is still likely in most people’s view that we will achieve that confidence and there will be rate cuts.”

At the same time, he said the data supported the Fed’s cautious approach to the first rate cut, and added that policymakers are still looking for more evidence that inflation is headed toward their 2% goal.

Powell also said it would be appropriate to slow the pace of the Fed’s balance-sheet unwind “fairly soon,” after policymakers held a discussion on their asset portfolio this week.

“The decision to slow the pace of runoff does not mean our balance sheet will shrink, but allows us to approach that ultimate level more gradually,” he said. “In particular, slowing the pace of runoff will help ensure a smooth transition, reducing the possibility of money markets experiencing stress.”

The S&P 500 index of U.S. stocks rose, while Treasury yields and the Bloomberg Dollar index fell. Traders boosted the probability that the Fed would begin rate cuts in June.

The Fed’s post-meeting statement was nearly identical to January’s, maintaining the guidance that rate cuts won’t be appropriate until officials have more confidence inflation is moving sustainably toward their 2% target.

The Federal Open Market Committee also reiterated its intention to continue reducing its balance sheet by as much as $95 billion per month. Some officials, including Dallas Fed President Lorie Logan, have called for an eventual slowing of the pace at which the Fed is shrinking its portfolio of assets.

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