The US Federal Reserve raises interest rates by 50 basis points. Fed chair Jerome Powell said the Federal Reserve is not close to ending its anti-inflation campaign of interest-rate increases as officials signaled borrowing costs will head higher than investors expect next year.

“We still have some ways to go,” he said to media on Wednesday in Washington after the Federal Open Market Committee raised its benchmark rate by 50 basis points to a 4.25 percent to 4.5 percent target range. Policymakers projected rates would end next year at 5.1 percent, according to their median forecast, before being cut to 4.1 percent in 2024 . It is a higher level than previously indicated.

Powell said that the size of the rate increase delivered on 1 February at the Fed’s next meeting would depend on incoming data — leaving the door open to another half-percentage point move or a step down to a quarter point — and he pushed back against bets that the Fed would reverse course next year.

“I wouldn’t see us considering rate cuts until the committee is confident that inflation is moving down to 2 percent in a sustained way,” he said. “Restoring price stability will likely require maintaining a restrictive policy stance for some time,” he said.

Effect on investors

The S&P 500 index dropped as investors digested the news.

“The committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time,” the FOMC said in its statement, repeating language it has used in previous communications.

Investors had been speculated that the Fed would soon pause its hikes after financial conditions eased. Until Wednesday, stocks had risen, while mortgage rates and the dollar had fallen since Powell last month suggested a policy shift was coming. They’d also bet rates would reach about 4.8 percent in May, followed by cuts totaling 50 basis points in the second half of the year.

“It is our judgment today that we are not at a sufficiently restrictive policy stance yet,” the Fed chief said. “We will stay the course until the job is done.”

Powell had previously signaled plans to moderate hikes, while emphasizing that the pace of tightening is less significant than the peak and the duration of rates at a high level.

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The decision follows four consecutive 75 basis-point hikes that have boosted rates at the fastest pace since Paul Volcker led the central bank in the 1980s.

“It’s going to take a while to for the Fed to achieve what they want to achieve,” former New York Fed President William Dudley said in an interview.

Consumer-price increases have begun a more pronounced slowdown from their 40-year high earlier this year. But a growing cadre of economists expect the Fed’s aggressive action to tip the US into recession next year.

Such concerns have drawn lawmaker criticism, with Democratic senators Elizabeth Warren, Bernie Sanders and Sheldon Whitehouse warning that rate hikes risk “slowing the economy to a crawl.”

Officials gave a clearer sign that they expect higher rates to impact the economy. They cut their 2023 growth forecasts, seeing expansion of 0.5 percent, according to median projections released Wednesday. They raised their estimate for 2022 GDP slightly to 0.5 percent. The central bankers increased their projection for the unemployment rate next year to 4.6 percent from its 3.7 percent level in November.

The distribution of rate forecasts also skewed higher, with seven of 19 officials seeing rates above 5.25 percent next year.