WASHINGTON (AP) — Federal Reserve officials signaled Wednesday that they still expect to cut their key interest rate three times in 2024, fueling a rally on Wall Street, despite signs that inflation remained elevated at the start of the year.

For now, the officials kept their benchmark rate unchanged for a fifth straight time.

Speaking at a news conference, Chair Jerome Powell said the surprising pickup in inflation in January and February hadn’t fundamentally changed the Fed’s picture of the economy: The central bank still expects inflation to continue to cool, though more gradually than it thought three months ago.

The recent high inflation readings followed six months of steady slowdowns in price increases. Economists and Wall Street investors were looking for some clarification Wednesday about how the latest inflation reports were viewed at the Fed.

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AP AUDIO: Federal Reserve still foresees 3 rate cuts this year but envisions higher rates in future.

AP correspondent Haya Panjwani reports on the Federal Reserve’s update on interest rate cuts.

The January and February data, Powell said, “haven’t really changed the overall story, which is that of inflation moving down gradually on a sometimes bumpy road towards 2%,” the Fed’s target.

In new quarterly projections they issued, the policymakers forecast that stronger growth and inflation above their 2% target level would persist into next year. Overall, the forecasts suggest that the Fed still expects an unusual combination: A healthy job market and economy in tandem with inflation that continues to cool — just more gradually than they had predicted