The Federal Reserve on Wednesday held benchmark interest rates near zero, but indicated rate hikes could be coming a bit sooner than expected while significantly cutting their economic outlook for this year.

Along with those largely expected moves, officials on the policymaking Federal Open Market Committee indicated they will start pulling back on some of the stimulus the central bank has been providing during the financial crisis. There was no indication, though, as to when that might happen.

“If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted,” the FOMC’s post-meeting statement said. Respondents to a recent CNBC survey indicated they expect tapering of bond purchases to be announced in November and begin in December.

In light of those expectations, the committee voted unanimously to keep short-term rates anchored near zero. However, more members now see the first rate hike happening in 2022. In June, when members last released their economic projections, a slight majority put that increase into 2023.

More information could be coming when Fed Chairman Jerome Powell speaks during his post-meeting news conference at 2:30 p.m. ET.

Markets reacted little to the Fed news initially, with major stock averages continuing strong gains and government bond yields mixed.

There were some substantial changes in the Fed’s economic forecasts, with a decrease in the growth outlook and higher inflation expectations.

The committee now sees GDP rising just 5.9% this year, compared to a 7% forecast in June. However, 2023 growth is now set at 3.8%, compared to 3.3% previously, and 2.5% in 2023, up one-tenth of a percentage point.

Projections also indicated FOMC members see inflation stronger than indicated in June. Core inflation is projected to increase 3.7% this year, compared to the 3% forecast the last time members indicated their expectations. Officials then see inflation at 2.3% in 2022, compared to the previous projection of 2.1%, and 2.2% in 2023, one-tenth of a percentage point higher than the June forecast.

Including food and energy, officials expect inflation to run at 4.2% this year, up from 3.4% in June. The subsequent two years are expected to fall back to 2.2%, little changed from the June outlook.

In another move, the Fed said it would double the level of repurchase its daily market operations to $160 billion from $80 billion.

Markets had been expecting little in the way of major decisions from the meeting, but have been on edge in part over when the Fed will begin reducing the pace of its monthly bond purchases.

Powell indicated in August, during the Fed’s annual symposium in Jackson Hole, Wyoming, that he and others were of the position that the central bank had met its inflation target and could start reducing the minimum $120 billion a month in buying of Treasurys and mortgage-backed securities.

Investors also were looking to the meeting to see where Fed officials stand on the inflation outlook.

The Fed’s preferred inflation measure – the personal consumption expenditures index less food and energy prices – accelerated by 3.6% in July, the highest level in 30 years. However, Powell has said repeatedly that he expects price pressures to subside as supply chain factors, goods shortages and unusually high levels of demand return to pre-pandemic levels.

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