The Federal Reserve on Wednesday left a key short-term interest rate at a 23-year high after an uptick in the rate of inflation dashed hopes the central bank would reduce borrowing costs soon.

"In recent months, there has been a lack of further progress toward the committee's 2% inflation objective," the Fed said in a statement after a two-day meeting.

The 12-month rate of inflation using the Fed's preferred PCE index rose to 2.7% in March from 2.5%, leaving it well above the bank's goal. Other inflation measures are even higher.

Labor costs also rose in the first quarter more than expected, adding to the upward pressure on inflation.