WASHINGTON — The Federal Reserve cut its key interest rate Wednesday by a quarter-point — its third cut this year — but also signaled that it expects to reduce rates more slowly next year than it previously envisioned, largely because of still-elevated inflation.

The Fed’s 19 policymakers projected that they will cut their benchmark rate by a quarter-point just twice in 2025, down from their estimate in September of four rate cuts. Their new projections suggest that consumers may not enjoy much lower rates next year for mortgages, auto loans, credit cards and other forms of borrowing.

Fed officials have underscored that they are slowing their rate reductions as their benchmark rate nears a level that policymakers refer to as “neutral” — the level that is thought to neither spur nor hinder the economy. Wednesday’s projections suggest that the policymakers think they may be close to that level. Their benchmark rate stands at 4.3% after the latest rate cut, which followed a steep half-point reduction in September and a quarter-point cut last month.

“I think that a slower pace of (rate) cuts really reflects both the higher inflation readings we’ve had this year and the expectations that inflation will be higher” in 2025, Chair Jerome Powell said at a news conference. “We’re closer to the neutral rate, which is another reason to be cautious about further moves.”

“Nonetheless,” Powell said, “we see ourselves as still on track to cut.”

This year’s Fed rate reductions have marked a reversal after more than two years of high rates, which largely helped tame inflation but also made borrowing painfully expensive for American consumers.

But now, the Fed is facing a variety of challenges as it seeks to complete a “soft landing” for the economy, whereby high rates manage to curb inflation without causing a recession. Chief among them is that inflation remains sticky: According to the Fed’s preferred gauge, annual “core” inflation, which excludes the most volatile categories, was 2.8% in October. That is still persistently above the central bank’s 2% target.

At the same time, the economy is growing briskly, which suggests that higher rates haven’t much restrained the economy. As a result, some economists — and some Fed officials — have argued that borrowing rates shouldn’t be lowered much more for fear of overheating the economy and re-igniting inflation. On the other hand, the pace of hiring has cooled significantly since 2024 began, a potential worry because one of the Fed’s mandates is to achieve maximum employment.

“We don’t think we need further cooling in the labor market to get inflation below 2%,” Powell said at his news conference.