Federal Reserve Chair Jerome Powell laid the table to begin slowing down the pace of interest rate hikes on Wednesday while also stressing that the question of when the central bank should moderate the size of increases is less important than how high the central bank will ultimately raise rates to tame inflation.

“We still have some ways to go, and incoming data since our last meeting suggest that the ultimate level of interest rates will be higher than previously expected,” Powell said. “Our decisions will depend on the totality of incoming data and their implications for the outlook for economic activity and inflation.”

That means interest rate projections for ending rate hikes around a level of 4.6% forecast back in September are now too low. The question now is: How much higher will rates go?

Roberto Perli, a long time Fed watcher now at Piper Sandler, says he thinks the peak rate could rise to 4.8% — at a minimum, adding that the Fed is slowing down the pace of hikes because it cannot continue hiking 75 basis points every meeting.

“If it did," Perli wrote in a note to clients, "it would reach 10.6% by the end of 2023.”

The market is pricing in a peak fed funds rate of 5.15% in June of 2023 — or about 20 basis points higher than before Wednesday's Fed meeting.

Wilmer Stith, bond portfolio manager at Wilmington Trust, told Yahoo Finance that he thinks the terminal rate may ultimately be higher and stay higher for longer than what markets are expecting, especially given that the Fed hasn’t seen the progress on inflation they’d like yet.

“Chair Powell made painfully clear there’s more wood to chop,” Stith said. “Weakness in the economy limited to pockets such as those tied to areas like housing coupled with a strong job market is putting them in a box trying to get to 2% on inflation. That said, it will depend on data. While we’ve been getting better than expected payroll numbers, we could get a weaker number Friday that changes the calculus."

There will also be two consumer price index (CPI) reports, a key barometer of inflation, before the Fed’s next interest rate announcement on December 14. Powell note that the central bank needs to see a clear trajectory showing inflation falling before even thinking about a pause in rate hikes. Instead, core readings on inflation – excluding volatile food and energy prices – have continued to climb.

"The inflation picture has become more and more challenging over the course of this year," Powell said. "That means we have to have policy more restrictive, and that narrows the path to a soft landing."