While the resilient economy has offered President Joe Biden a key talking point for his reelection, the prospect that high rates will continue to weigh on indebted households and firms as the race heats up could undercut his message of optimism. It could also shake public confidence by triggering the demise of more banks or other vulnerable businesses as the year wears on.

“Keeping rates at these levels will pull more skeletons out of the closet,” said Laura Rosner-Warburton, a senior official at MacroPolicy Perspectives and a former staffer at the New York Fed.

On the one hand, the central bank’s cautious approach increases the odds that the economy could slow gradually rather than sharply drop into recession — pulling off a so-called soft landing that would be a boon to Biden’s chances.

But it also underscores how confounding the economy has been for central bank policymakers. The Fed has raised rates 10 times in a row — the fastest pace in four decades — but the labor market is booming, home prices are holding up better than forecast in the face of higher mortgage rates, and consumers are still spending. On top of that, inflation is drifting down only slowly.

Part of it is that the central bank’s rate hikes can take more than a year to have a full impact on growth and inflation.

Still, the surprising strength of the economy has left Fed officials as uncertain about what’s ahead as everyone else. They now think borrowing costs are high enough to take a sizable bite out of economic growth, but they’re not confident enough to say no more rate hikes are coming. Though top policymakers have suggested they won’t raise rates at their June 13-14 meeting, they’ve left an increase on the table for the following one in July.

“I believe that we’re pretty close to where we need to be in order to hold for a little bit,” Philadelphia Fed President Patrick Harker, who will vote when central bank policymakers meet Wednesday on whether to hold rates steady, told POLITICO. “That said, I don’t know exactly if we’re at that place.”

The point of holding off on another rate hike, at least in June, is to have more time to assess whether some of the slowing officials have seen is really a consistent downward trend.

The most recent U.S. employment report provided a confusing mix of information: Companies added a strong 339,000 jobs in May, but households reported higher unemployment.

Inflation, meanwhile, has steadily dropped, but key services sectors — where wages are one of the biggest expenses — are still seeing higher price increases than the Fed would like.

“As those start to level off, I’d be more confident,” Harker said. “As long as we’re moving inflation in the right direction, even if it takes longer than we all hope for [to get back to 2 percent], we’re doing OK.”

The Fed doesn’t feel the need to slam on the brakes to get inflation all the way back down now. Policymakers just want to feel confident that the economy will get there in the next couple of years, and they’re watching the data to find out whether the economy is on that path.

Adding to the complexity is that it’s unclear whether an additional increase sometime this year might suddenly trigger a disproportionate effect on the economy, tripping an unseen wire that sends some part of the financial sector into a tailspin.

“The goal has been trying to get rates to a place where you’re going to slow the economy but not tank the economy,” said Tim Duy, chief U.S. economist at SGH Macro Advisors. “What is that level? No one knows, exactly.”

There are signs that growth has cooled, but they’re murky at best. Even in housing, where rates have had the clearest impact, the effects have been surprisingly muted.

Mortgage rates shot up, putting a significant dent in the market; new listings are down 23 percent, and pending sales are down 17 percent, said Daryl Fairweather, chief economist at Redfin.

But a housing shortage, combined with the fact that so many homeowners locked in low rates during the pandemic, has meant that prices haven’t dropped significantly. People looking to move have fewer options, and people who own aren’t eager to give up their cheap rates.

“Usually when the Fed raises interest rates people feel poorer because they can’t refinance, and usually they know if they sell they would get a lower price for it,” Fairweather said.

That’s not the case this time, so “it’s not having as much of a macro effect on the economy as it did in 2006,” she said.

Meanwhile, while inflation has slowed considerably from its peak a year ago, that might have as much to do with easing supply chains and depleted government spending as it does with higher rates.

Now, Fed officials are watching to see whether it’s all adding up to slower inflation.

“Holding is really a test of the dynamics of the market,” said Doug Duncan, chief economist at housing financier Fannie Mae. “You’re not changing the backdrop, you’re waiting to see what things are in motion and how they are going to mature.”

“If the increase in the unemployment rate is suggesting that there’s more to come, you want to sit and watch for that to see, is that true?”