The Fed Raises Rates a Quarter Point and Signals More Ahead

“The job is not fully done,” he said.

So far, evidence of labor market moderation in particular remains inconclusive: Initial claims for jobless benefits remain muted, and the unemployment rate is as low as it has been in half a century. Job openings rose in December, and 1.9 positions are now available for every unemployed worker.

“The labor market remains extremely tight,” Mr. Powell said on Wednesday. The Labor Department will release January hiring and unemployment figures on Friday.

That creates a source of tension for the Fed. Officials always expected prices to begin to cool as pandemic supply chain issues cleared and consumers worked through big savings stockpiles and slowed their spending — and that deceleration is showing up. But some policymakers worry that rapid wage growth could keep inflation in services — hotels, restaurants, sporting events — stubbornly higher than it was before the pandemic.

“We saw an acknowledgment that the inflation picture is getting better, but that doesn’t mean that the Fed is close to declaring victory over it by any means,” said Sarah House, senior economist at Wells Fargo.

The global economy is also not as weak as many expected, as a mild winter mitigates energy-related problems in Europe and as China reopens from rolling shutdowns. In their statement, Fed officials nodded to the fact that worldwide growth is less imperiled than it seemed last year, dropping a line that said the war in Ukraine was “weighing on global economic activity.”

Instead, the Fed’s policymakers said the war “is contributing to elevated global uncertainty.”

Such signs of economic resilience could help the Fed to pull off a soft landing, in which it tempers inflation without causing a deep downturn. On the other hand, continued economic strength could shore up demand and keep price increases from moderating sufficiently, if growth proves too robust.

Fed officials will be focused on where the economy is headed — and how much more they think it needs to slow — in the coming months as they determine how high to raise rates and how long they need to leave them elevated.