The U.S. Federal Reserve kept its key lending rate unchanged and projected one rate cut in 2024, as opposed to three expected in March.

The Fed voted unanimously to maintain its benchmark interest rate between 5.25 and 5.50%, saying in a statement that "modest" progress had been made toward its long-term inflation target of 2%. Fed officials also raised their inflation forecasts for 2024 and kept their growth outlook unchanged.

The Fed has kept its target for the overnight bank-to-bank lending rate in its current range since last July in a bid to squeeze high inflation out of the economy without massive harm to the job market.

Four Fed policymakers feel the Fed should not cut rates at all this year, the fresh projections show. Three months ago just two thought so.

Meanwhile, seven policymakers believe a single rate cut will be appropriate by year's end, compared with eight who believe two rate cuts will be needed.

The annual consumer price index (CPI) came in at 3.3% last month, down 0.1 percentage point from April and unchanged on a monthly basis, the Labor Department said. This was slightly below expectations.

Alongside its interest rate decision, the Fed also updated economic forecasts from the members of its rate-setting Federal Open Market Committee (FOMC).

Policymakers lowered their individual forecasts for the number of rate cuts they expect this year, reducing the median projection for interest rates at end-2024 to the midpoint between 4.50 and 4.75.

This means that FOMC participants only expect one 0.25 percentage point cut before year-end, two less than in the last update in March.

Fed officials also raised their inflation forecasts for 2024 and kept their growth outlook unchanged.