But if inflation continues to inch upward, the central bank may decide it needs to leave rates high to avoid a repeat of runaway inflation. Inflation peaked at 9.1% in June 2022 before slowly making its way back down closer to the Fed's target range of 2%.

Federal Reserve Chair Jerome Powell said Thursday that interest rates are still expected to decline further, but suggested they might not be that much lower over the next few months.

A strong economy is giving Federal Reserve officials room to move “carefully” as they lower interest rates, the central bank chair said.