US Federal Reserve Chairman Jerome Powell speaks at a news conference following a Federal Open Market Committee meeting on May 04, 2022 in Washington, DC. (Getty images)

The US Federal Reserve on Wednesday held its benchmark lending rate steady for a seventh consecutive time and projected one rate cut later this year as it noted "modest further progress" towards its 2 percent inflation target.

After the two-day Federal Open Market Committee meeting, the central bank announced the decision to maintain the rate in the 5.25 to 5.50 percent range, a 23-year high. The decision came hours after new data showed inflation eased slightly last month.

FOMC members' latest median economic projections showed that the federal funds rate would be cut to 5.1 percent at the end of this year, up from their March forecast of 4.6 percent. The projection signaled the possibility of one quarter-point rate cut this year, two fewer than previously expected.

"Inflation has eased over the past year but remains elevated. In recent months, there has been modest further progress toward the committee's 2 percent inflation objective," the Fed said in a press release, noting headway on the inflation front.

Policymakers have been seeking clear evidence that inflation is on a sustainable path to its inflation target as they are looking at incoming economic data to find the right timing to begin rate cuts.

Ahead of the decision, the US Labor Department said in a new report that the consumer price index, a key gauge of inflation, rose 3.3 percent on a yearly basis in May -- a smaller increase than the 3.4 percent rise in April. The latest reading is slightly below economists' forecast of 3.4 percent.

During a press conference, Fed Chair Jerome Powell highlighted the central bank's readiness to respond to changes in the labor market and inflation data.

"If the labor market were to weaken unexpectedly, or if inflation were to fall more quickly than anticipated, we are prepared to respond," he said.

"Policy is well positioned to deal with the risks and uncertainties that we face in pursuing both sides of our dual mandate," he added, referring to the Fed's two-pronged pursuit of maximum employment and its inflation objective.

Though he called the latest economic data "progress," Powell pointed out the need for the Fed to have greater confidence before easing monetary policy.

"We don't see ourselves as having the confidence that would warrant beginning to loosen policy at this time," he said.

The US key rate has remained unchanged since a quarter percentage point increase to the current level in July. Before the freeze, the Fed carried out an aggressive rate-hiking campaign launched in March 2022 to bring down inflation.

This week's Fed rate freeze put the gap between the key rates of South Korea and the United States at up to 2 percentage points. (Yonhap)