The Federal Reserve on Wednesday raised US interest rates by 25 basis points, its 10th consecutive increase, and indicated a possible pause in future meetings.
The latest action brings the Fed's interest rates to the target range of between 5 per cent and 5.25 per cent.
The US central bank is expected to keep rates steady before cutting them later in the year because of a slowing economy, data from the CME Group showed.
"The US banking system is sound and resilient," the Fed said.
"Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring and inflation. The extent of these effects remains uncertain."
Omitted from the committee's latest statement was the phrase, "anticipates that some additional policy firming may be appropriate".
Instead it says, "in determining the extent to which additional policy firming may be appropriate to return inflation 2 per cent".
"That's a meaningful change that we were no longer saying that we anticipate," Fed chairman Jerome Powell told reporters, suggesting a potential pause in future decisions.
Mr Powell did not slam the door shut on issuing additional increases, however, saying the central bank is "prepared to do more" if warranted.
"We will make that determination meeting by meeting, based on the totality of incoming data," he said.
Inflation has been the dominant concern for policymakers, who have been on a historic mission to rein in the rising cost of goods.
But with inflation still running well above the Fed's 2 per cent long-term goal, Mr Powell has warned that their fight remains far from over.
By raising interest rates, the Fed has made borrowing costs more expensive for households and businesses, slowing consumer demand and hiring.
The labour market, which has been a particular headache for the Fed, has shown some signs of cooling.
The US economy added a lower-than-expected 236,000 jobs in March as the unemployment rate ticked up to 3.5 per cent last month.
The Labour Department's next report, to be published on Friday, is expected to show unemployment slightly increased again.
"The labour market remains very tight over the first three months of the year," Mr Powell said.
US Federal Reserve raises interest rates for tenth consecutive time
But there are indicators that the labour market is returning to a better balance with wage growth easing, job vacancies declining and labour force participation rate increasing.
Government data released since the Fed's previous meeting has shown a notable slowdown in the economy, headlined by the US gross domestic product slowing from 2.6 per cent in the final quarter of 2022 to 1.1 per cent in the first quarter this year.
Tighter lending conditions caused by the banking crisis are expected to cause further tightening with smaller banks less likely to approve loans, further exacerbating the economy's slowdown. Minutes released by the Fed from its March meeting showed policymakers are projecting a “mild recession” later this year.
Mr Powell said the possibility of avoiding a recession was more likely than having one.
The three US market indexes had minimal slumps after the Federal Reserve's decision.
The Dow Jones, S&P 500, and Nasdaq Composite recorded less than 1 per cent of a decrease.