(CNN) — The Federal Reserve unanimously approved a quarter-point interest rate hike Wednesday, slowing the pace of its increases in a clear sign that the central bank is seeing progress in its fierce battle with inflation.

The decision, at the conclusion of the Federal Open Market Committee’s first meeting of 2023, comes after months of jumbo-sized rate increases intended to cool the economy, and marks the return to a more traditional interest-rate policy.

Since the last Fed meeting in December, two economic trends have indicated that the central bank’s mission to cool the economy and stall price increases is working: Recent data on wage growth and inflation have been encouraging and economic growth signals have become concerning. The prices of many goods that consumers binged on during the pandemic have started to fall now that consumer demand has shifted to services. Energy costs have also dropped, and the housing market has slowed.

Fed officials nodded towards those trends in a post-meeting statement on Wednesday, writing that “inflation has eased somewhat but remains elevated.”

And while Fed officials are slowing rate hikes after months of unusually aggressive action, the central bank is far from declaring victory. Wednesday’s statement included language that made it clear policymakers expect that more hikes will be necessary to temper inflation. “The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time,” they wrote. The extent of these “future increases,” they said will depend on a number of economic and financial factors.

While those trends could make the case for slowing rate hikes after months of unusually aggressive action, the central bank is far from declaring victory. It takes time for monetary policy to take effect and for supply and demand to rebalance. Senior Fed officials like Vice Chair Lael Brainard and Governor Christopher Waller have in recent weeks stressed the need to see six months of positive data before they stop hiking rates.

Ahead of Fed Chair Jerome Powell’s news conference at 2:30 p.m., the key question facing Fed watchers is how the central bank will signal the path forward for the rest of the year. Will Powell dampen expectations and reiterate that the fight against inflation still has “a ways to go,” or will Fed officials signal that they’re ready to ease up on rate hikes?

“This first meeting of the year will no doubt be a very interesting one as it will set the tone for the rest of year,” wrote EY Parthenon Chief Economist Gregory Daco in a recent note. “But, rather than a slow waltz, we anticipate an infernal tango as the Fed and markets try to find synchronized rhythms once again.”

This story is developing and will be updated.

Fed approves smallest rate hike since March, in nod to improved inflation outlook