"Considering how far and how fast we've moved, we judged it prudent to hold the target range steady to allow the committee to assess additional information and its implications for monetary policy," Fed Chairman Jerome H. Powell said at a news conference.
The widely expected decision to maintain interest rates was unanimous among the committee's 11 members.
Nearly all committee participants "view it as likely that some further rate increases will be appropriate this year to bring inflation down to 2% over time," Mr. Powell said.
The committee's median projection for the federal funds rate at the end of 2023 rose to 5.6%, up from the 5.1% projected in March, according to projections the Fed released Wednesday. By the end of 2024, the committee's median projection is now 4.6%, up from 4.3% in March.
"In determining the extent of additional policy firming that may be appropriate to return inflation to 2% over time, the committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy effects economic activity and inflation and economic and financial developments," Mr. Powell said.
Data released Tuesday from the Bureau of Labor Statistics show that inflation is easing, though still remains elevated. The consumer price index rose 4% in May, the smallest 12-month increase since March 2021 and below the 4.9% annualized rise recorded in April, according BLS data. The annualized CPI figure has dropped steadily since June 2022, when it was at 9.1%, a 40-year high.
The committee's median projection for personal consumption expenditures inflation by the end of 2023 is now 3.2%, down slightly from 3.3% in March. The committee sees PCE inflation decreasing to 2.5% by the end of 2024 and 2.1% by the end of 2025.
The 12-month change in total PCE prices stood at 4.4% in April, down from its peak of 7% in June 2022.
Also of note, the unemployment rate rose slightly in May to 3.7%, up from 3.4% in April, but it remains historically low. On Wednesday, Mr. Powell repeated his characterization of the labor market as "very tight."
Whitney Watson, global co-head and co-CIO of fixed income and liquidity solutions at Goldman Sachs Asset Management, said in a statement that with "the economy proving resilient, downside risks from banking stress fading, debt limit uncertainty behind us and inflation still hovering above target, we are unsurprised that the Fed has also hinted that 'additional policy firming' may be warranted."
Shortly after Wednesday's announcement, market participants indicated there is a 61.5% probability that the Fed will greenlight a quarter-point increase next month, according to the CME FedWatch Tool that tracks trading in the 30-day fed funds futures.
Mr. Powell said no decision has been made as to what the committee will do next month, but added, "I do expect it will be a live meeting."
The Fed's next meeting is July 25-26.