Ms. Yellen and her colleagues have concluded that the economy is growing about as fast as it can. Low rates encourage borrowing and risk-taking; the Fed is now trying to raise rates to a level that neither encourages nor discourages economic activity. Most Fed officials expect that the Fed will raise rates at least one more time this year.

So far, however, financial markets are not cooperating. Interest rates on auto loans have increased a little since the Fed started raising rates in 2015, but rates on mortgage loans are about the same. Rates on some corporate loans have even declined. Measures of financial conditions have loosened.

The march toward that neutral stance reflects the Fed’s upbeat view of economic conditions. “The labor market has continued to strengthen,” the Fed said in a statement published at the end of a two-day meeting of its policy-making panel, the Federal Open Market Committee.

The Fed added that economic growth “has been rising moderately so far this year,” making no mention of weakness during the winter.

The Fed in recent years has been consistent in predicting faster inflation — and in being wrong. The Fed conceded it was overly optimistic in predicting stronger inflation this year. In economic forecasts published Wednesday, Fed officials predicted that prices would rise by just 1.6 percent this year, down from a forecast of 1.9 percent in March.

Ms. Yellen said the Fed was keeping a close eye on a recent downturn in inflation. But she also said officials expected inflation to rebound because of the continued decline of the unemployment rate and other signs of a tighter labor market, including worker shortages in some parts of the country. The unemployment rate fell to 4.3 percent in May, and in a new set of forecasts the Fed published Wednesday, some officials predicted the rate could fall below 4 percent.

Ms. Yellen also noted a sharp decline in the price of cellphone service is weighing on inflation. That is a good thing for consumers, and a one-time event.