The Federal Reserve declined Wednesday to cut interest rates, saying it remains uncertain inflation is slowing enough, but some economists warned the financial regulators risk waiting too long to make cuts.

Fed Chairman Jerome Powell said the Fed has a lack of sufficient data that inflation is slowing enough to justify taking the pressure off interest rates yet. The Fed started raising the federal funds rate in March 2022 to battle inflation and continued until the  latter half of last year, when it decided to pause rates

The Fed issued a statement that it is waiting until it “has gained greater confidence” that inflation is moving toward its 2% goal to begin cutting rates.

The Fed’s preferred inflation indicator, the Personal Consumption Expenditures Price Index or PCE for short, rose 0.3% from December to January compared to 0.1% from November to December, which some economic experts say may be partly behind the decision to hold off on rate cuts. The PCE climbed 2.4% from a year ago compared to 5.4% from January 2022 to January 2023, an indication that inflation has been slowing in the long term.

Powell said, “We believe that our policy rate is likely at its peak for this tightening cycle and that if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year.”

He added that the Fed does not want to ease too much or too soon if that would risk a chance that inflation returns. Powell did not rule out pausing the rate for longer.

Skanda Amarnath, executive director of Employ America, an economic policy research group, and a former analyst at the New York Fed, said the Fed should avoid being too reactive to monthly inflation data, particularly in January and February, which have been hotter months for inflation in the past few years. A lot of businesses revise pricing with the new calendar year, Amarnath added, which can contribute to the rise.

Powell acknowledged on Wednesday that seasonal factors could have affected the data but that they didn’t add to the Fed’s confidence in slowing inflation either.

“Inflation is a volatile beast. Month to month, it can do weird things. But by and large, we’re seeing if you look at the year-over-year change in the [Consumer Price Index] and PCE, you’re broadly seeing progress,” he said.

The economy has also not shown signs of overheating for some time, Amarnath added.

“From everything we’re learning from the past, especially the last three to six months, it is a more normalized pace of job growth, a more normalized pace of wage growth … It’s largely moved in totality towards a still respectable and strong labor market,” he said.

Rakeen Mabud, chief economist and managing director of policy and research at the Groundwork Collaborative, an economic think tank, said she is worried that the Fed could wait too long to cut rates and damage the economy.

“All the Fed can do at this point is break this really strong recovery that we’ve had … I’m worried now because rate hikes are a really imprecise tool that acts with lags. I don’t know exactly when the full impact of these rate hikes are going to play out and neither does Jerome Powell,” she said.

Amarnath said that because Fed policy, although it is far from the only factor, has played a role in the past three recessions, the Fed should be careful with how it uses the federal funds rate in its campaign against inflation.

“You may not need to cut at this very meeting. But if you press your luck a little too long in terms of ‘OK, the economy is not collapsing right this second,’ and if you wait till something breaks, it may prove to be too late,” he said.

Americans say their top policy priority this year is strengthening the economy, according to a Pew Research Survey taken in January.

The Fed’s interest rate policies also affect housing supply and affordability. Mabud said that the Fed’s approach to meeting one of its stated goals — lowering prices — is helping to drive up housing costs, which in turn affects inflation measures. The Consumer Price Index, another inflation measure, shows that in February, shelter and gasoline were responsible for more than 60% of the index’s rise.

“Shelter costs continue to be a significant driver of inflation,” she said. “We’re seeing high mortgage rates which are driving up the cost of buying a house, which then pushes folks back into the potential rental market, which also pushes rents higher. The Fed’s high interest rate regime is also making constructing new houses more expensive. We have a shortage of 6.5 million homes, at least, in this country.”

The number of people recorded as unhoused on a single night rose to its highest level in January 2023, according to U.S. Department of Housing and Urban Development data released in December. The department attributed the rise in the number of unhoused people to the rental market, which has had high rent growth, and the ending of programs implemented early in the pandemic to keep people housed during an economic downturn.