The central bank again hiked interest rates by 0.25 percentage points on Wednesday but warned it was still trying to figure out how recent bank failures would affect the economy.

“We did consider that in the days running up to the meeting,” Fed Chair Jerome Powell told reporters after the Fed’s announcement, adding that “the inter-meeting data on inflation and the labor market came in stronger than expected and really before the recent events, we were clearly on track to continue with ongoing rate hikes.”

“The events of the last two weeks are likely to result in some tightening of credit conditions for households and businesses,” Powell said, noting this tightening “would work in the same direction as rate tightening in principle.”

In a nutshell, the Fed believes a pullback in bank lending and consumer concerns about the economy could have the same slowing impact on inflation as if the central bank boosted rates even higher. Even so, the Fed didn’t feel comfortable pausing rate hikes entirely with the economy still generally strong.

The jobless rate in February was just 3.6 percent, slightly higher than the 3.4 percent rate in January but still quite close to the lowest levels in more than 50 years. Inflation also dropped to a 6 percent annual rate in February, a lower but still high rate of price growth.

The Fed may soon pause its rate hikes, however. New projections show the baseline interest rate peaking at 5.1 percent by the end of the year — unchanged from its December projection — indicating that one more rate hike could be coming. The Fed said “additional policy firming may be appropriate.” 

We have a full recap of the Fed hike — and what Powell said about this agency’s role in the banking crisis — at TheHill.com.