WASHINGTON – March 19, 2015 – The Federal Reserve signaled Wednesday it's still in no hurry to raise interest rates amid a mixed economy, even though it took a step toward pulling the trigger later this year.

Fed policymakers as expected dropped a pledge to "be patient" as they consider increasing the Fed's benchmark short-term rate, now near zero, opening the door to a rate hike as early as June. The Fed last raised rates in 2006.

The Fed downgraded its economic outlook in Wednesday's statement, saying growth "has moderated somewhat" because of weak exports and a sluggish housing market, among other factors. It said it will bump up its key federal funds rate only when it "has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term."

The nuanced message shows a Fed struggling to respond to a plunging unemployment rate and anemic inflation that's being held down by low oil prices, a strong dollar and sluggish wage growth.

With inflation under 1 percent, Fed policymakers lowered their median interest rate forecast for the end of 2015 to a range of 0.625 percent from 1.13 percent. That suggests rates are more likely to rise in September than June, Royal Bank of Scotland economists wrote in a note to clients.

"The Fed does not yet appear to be convinced that the economy can withstand higher interest rates at this point," economist Michael Dolega of TD Economics said in a research note.

Fed policymakers appear eager to raise historically low rates after the economy added more than 3 million jobs in 2014 and 295,000 last month, pushing down the unemployment rate to a near-normal 5.5 percent from 10 percent in 2009.

A rise in the funds rate would ripple across the economy, pushing up rates for everything from mortgages and car loans to corporate bonds and personal savings accounts. But boosting rates while inflation is still feeble raises the risk that a tremor could nudge the economy into deflation, or a prolonged period of falling wages and prices that could lead to recession.

The Fed reiterated that it believes low oil prices "are transitory," and their anticipated increase should push inflation back toward the Fed's annual 2 percent target.

Yellen would not specify what would cause policymakers to be "reasonably confident" that inflation will gain momentum in the months ahead. But she said faster wage growth "would be at least a symptom that inflation will move up over time."

Policymakers also reduced their forecasts for economic growth this year to 2.3 percent to 2.7 percent from 2.6 percent to 3 percent in their December projection. Harsh winter weather and a pullback in consumer spending are among the factors hampering economic activity in the current quarter.

Fed policymakers estimate annual inflation will be just 0.6 percent to 0.8 percent this year, vs. their previous forecast of 1 percent to 1.6 percent. They lowered their forecast for 2016 just slightly to 1.7 percent to 1.9 percent.

At the same time, the Fed expects strong job growth to drive the unemployment rate – now 5.5 percent and close to the Fed's long-run goal – to 5 percent to 5.2 percent by year's end, below its previous forecast of 5.2 percent to 5.3 percent.

The Fed also expects a lower long-run jobless rate of 5 percent to 5.2 percent compared with its prior forecast of up to 5.5 percent. That means the Fed believes unemployment can fall more before setting off higher wages and inflation, potentially delaying the first rate increase.

Falling unemployment typically drives up wages and prices as employers compete for fewer workers.

Businesses can still draw from an ample pool of discouraged workers who stopped looking for jobs and part-timers who prefer full-time positions – vestiges of the recession that are allowing firms to raise pay cautiously.

Copyright 2014, USATODAY.com, Paul Davidson