The Federal Reserve maintained its benchmark interest rate on Wednesday in a range of 5.25%-5.50%, the highest in 22 years, but signaled it will likely cut interest rates by a total of 75 basis points, or 0.75%, in the year ahead.

In September, the Fed's forecasts had suggested the central bank would cut interest rates by 0.50%. The Fed has moved in 25-basis-point increments over the last year, indicating the central bank now expects to cut interest rates three times in 2024.

These projections come as the central bank now expects inflation to fall to 2.4% next year — down from 2.5% forecast in September — and drop further to 2.2% by 2025.

Read more: What the Fed rate-hike pause means for bank accounts, CDs, loans, and credit cards

Wednesday's policy statement tweaked language leaving room for rate hikes.

"In determining the extent to which any additional policy firming may be appropriate," the statement read, "… the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments."

Earlier statements had not included "any" before the mention of additional rate hikes, suggesting the central bank is now biased against further interest rate increases. This policy meeting marks the third meeting in a row the central bank has held rates at current levels.

Fed Chairman Jerome Powell said at a press conference Wednesday afternoon that "we added the word 'any' as an acknowledgement that we are likely at or near the peak rate for this cycle."

He added, though, that "participants did not want to take the possibility of further hikes off the table, so that’s what we were thinking."

Powell reiterated several times at his press conference that the Fed still needs to see more evidence that inflation is moving down to its 2% goal and made it clear the economy could still move in surprising directions next year.

"Nobody is declaring victory," he said. "That would be premature."

While "there is little basis for thinking that the economy is in a recession now," he added, "there is always a probability that there will be a recession in the next year, and it’s a meaningful probability no matter what the economy is doing."

The Fed chair also declined to provide any guidance on when the Fed might cut rates. Some on Wall Street are expecting a cut as early as March.

But he made it clear that Fed officials are beginning the conversation of when to dial back policy restraints. He said it was a "topic of discussion" at the central bank’s meeting Wednesday and "this will be a topic for us looking ahead."

Powell, responding to a question from Yahoo Finance’s Jennifer Schonberger, made it clear the Fed wouldn’t wait until inflation gets all the way down to 2% to start cutting.

"It would be too late," he said. "You would want to be reducing restriction on the economy before you get to 2% … so you don’t overshoot."

'Remains elevated'

There were other clues about the current thinking of Fed officials in Wednesday's policy statement.

Acknowledging progress in inflation, officials changed long-held language in the statement to note that inflation has "eased over the past year, but remains elevated." Previously, the central bank had merely referred to inflation as "elevated."

Officials also acknowledged in their statement the slowdown in the economy since the torrid pace of over 5% in the third quarter. The Fed sees the economy growing 1.4% next year, down a tenth from the 1.5% forecast in September.

Fed officials still see the unemployment rate rising to 4.1% next year.

Recent readings on inflation do show it dropping closer to the central bank’s target. The Fed’s favored inflation measure — the core Personal Consumption Expenditures index, which excludes volatile food and energy prices — clocked in at 3.5% for the month of October, down from 3.7% in September and 4.3% in June.

The Consumer Price Index on a core basis showed inflation rose 4% in November, the same clip as in October.

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