Faced with slowing growth and rising prices, the Federal Reserve signaled Tuesday that it remains focused on the latter and will continue pushing interest rates higher in coming months.

The Fed carried out its eighth straight quarter-point tightening, raising the fed funds target to 3%, its highest level since October 2001. The policymaking Federal Open Market Committee also warned that rising energy prices have led to a slowdown in the rate of spending growth in the economy, but reiterated its vow to carry out future rate hikes at a "pace that is likely to be measured."

"Recent data suggest that the solid pace of spending growth has slowed somewhat, partly in response to the earlier increases in energy prices," the panel said in its biggest single revision of language. "Labor market conditions, however, apparently continue to improve gradually. Pressures on inflation have picked up in recent months and pricing power is more evident."

Tuesday's news was largely anticipated on Wall Street, where most people were focused on the wording of the Fed's statement. Market watchers remain convinced that the Fed is poised to raise rates by a quarter-point again in June, and probably in the months beyond.

Other notable changes came in the FOMC's language about inflation, dropping a clause that said "longer-term inflation expectations remain well contained." The panel reiterated that "pressures on inflation have picked up in recent months and pricing power is more evident," but omitted a sentence stating that energy prices hadn't notably fed through to core consumer prices

"The Fed is a bit more concerned about inflationary prospects than about the economy slowing," said Barry Hyman, an equity market strategist with Ehrenkrantz King Nussbaum. "The likeliohood of them ending interest rate hikes in the near future decreased."

The FOMC's risk assessment remained identical, highlighting its belief that underlying inflation is in check.

"The committee perceives that, with appropriate monetary policy action, the upside and downside risks to the attainment of both sustainable growth and price stability should be kept roughly equal. With underlying inflation expected to be contained, the committee believes that policy accommodation can be removed at a pace that is likely to be measured. Nonetheless, the committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability."

"There are a lot of data points pointing to a slowing economy, and the Fed obviously understands that," Hyman said. "They may also see the slowing of the economy as a positive in that it is something that can cure the ills of inflation, so they might see that it could actually be a benefit down the road."

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