The Federal Reserve held interest rates steady Wednesday but hinted that it is drawing nearer to a rate cut as it makes more progress toward its goal of getting inflation down.

The central bank voted to keep its benchmark interest rate in a range of 5.25%-5.50%, a 23-year high. The decision was unanimous.

The fed funds rate has been in this range since last July as part of the Fed’s aggressive campaign to tamp down inflation that ballooned during the pandemic.

But Fed officials hinted they are getting closer to the confidence needed to lower rates as inflation continues to cool and the job market slows, making a cut at its next meeting on Sept. 17-18 increasingly likely.

“In recent months there has been some further progress towards the Committee’s 2% inflation objective,” officials said in their policy statement. It was a change from the "modest further progress" cited in the prior statement at the Fed's last meeting.

They also noted that the risks to both sides of their dual mandate — inflation and full employment — “continue to move into better balance” — a change from “moved toward better balance.”

“The outlook is uncertain and the Committee is attentive to the risks to both sides of its dual mandate,” the statement read.

Officials did maintain language in their policy statement stating that “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 central bank also reiterated that inflation has eased over the past year while characterizing inflation as “somewhat” elevated.

Fed officials also noted that job gains have moderated, and that while the unemployment rate has moved higher it remains "low."

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

The language changes today come after some key Fed officials have been emphasizing in the weeks leading up to Wednesday's meeting that they were getting closer to having confidence inflation was sustainably dropping to their 2% goal.

That confidence had slipped somewhat following hotter-than-expected inflation readings in the first quarter. But three straight months of better data have restored some optimism.

The latest reassurance came last Friday when a new reading of the Fed’s preferred inflation gauge — the core Personal Consumption Expenditures (PCE) index — showed its lowest annual gain in more than three years.

The 2.6% annual increase in the month of June was the same level as May and down from 2.8% in April. On a three-month annualized rate, core PCE dropped back to 2.3% from 2.9%.

Another inflation measure, the Consumer Price Index (CPI), has also shown progress.

On a "core" basis — which excludes volatile food and energy prices the Fed can’t control — CPI rose 3.3% year over year in the month of June. That was down from 3.4% in May and 3.6% in April.

Fed officials have also been making it clear they are paying more attention to a slowing job market, another sign that cuts were likely nearing.

The unemployment rate has ticked up for two consecutive months to 4.1% — above where some Fed officials predicted the rate would be at the end of this year.

This is important because the Fed has a dual mandate to maximize employment in the US while maintaining stable prices.

Most Fed watchers said in the runup to Wednesday’s meeting that the central bank still needed just a bit more time to be sure about cuts, while also preparing the markets for the significant action to come.

In fact, some Fed officials have indicated they need more than one quarter’s worth of good data to know for sure that inflation is traveling in the right direction. They may want to see what the July and August readings show first.

Read more: Fed predictions for 2024: What experts say about the possibility of a rate cut

A September rate cut could cause the central bank to face political criticism from both sides of the aisle in Washington.

Lawmakers from both parties have signaled they would criticize the Fed if a decision made at the last meeting before Election Day didn't go their way.

If Powell and his colleagues choose to keep rates at a 23-year high, a growing chorus of Democratic critics calling for cuts may reach a crescendo.

But if policymakers do indeed cut, Republicans from Donald Trump on down will be sure to cast

the move as caving to election-year pressure.

In an interview with Bloomberg published earlier this month, the Republican nominee again reiterated that central bank officials should not ease monetary policy before the November election.

"It’s something that they know they shouldn’t be doing," Trump said.

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