The Fed: Fed raises interest rates to 22-year high and signals it is prepared to do more

“We remain committed to bringing inflation back to our 2% goal,” Chair Jerome Powell said in a press conference after the Fed rate hike. “No one should doubt that.”

Stocks
SPX,
-0.02%
were slightly higher after the Fed meeting. Bond yields
TMUBMUSD10Y,
3.864%
fell slightly.

Powell said the Fed would assess additional information on inflation, employment and economic growth before determining its next step. He stressed repeatedly that the Fed would remain vigilant and keep its options open.

Don’t miss: Read MarketWatch’s live coverage of the Fed rate hike

“I would say it is possible we could raise [rates] at the September meeting if the data warranted, and it possible we would choose to hold steady at that meeting,” Powell said.

The vote to raise the benchmark rate this week was unanimous.

“While recent inflation prints have been softer than expected, this is a Fed that does not want to declare [its] mission accomplished,” said Olu Sonola, head of U.S. Economics at Fitch Ratings.

The Fed has raised interest rates aggressively over the past 16 months to try to get the cost of money high enough to cool inflation. The central bank isn’t sure it has gotten rates to a level at which they are “restrictive” to growth.

In the wake of the signs of progress in the June consumer inflation data released earlier this month, many Wall Street economists think today’s rate hike will be the final one of the cycle.

They think the economic data over the next six weeks until the Fed meets again in late September will convince central bankers that inflation is coming down and that they can hold rates steady.

There will be four major indicators —July and August reports on both employment and consumer inflation — before the Fed meeting in September. Powell said those will be critical to the Fed’s thinking.

There is a wide range of opinions about the future path of policy. Many economists think the Fed might have raise rates at least one more time this year. Others are worried the Fed has already overdone it.

Former top Obama economist Jason Furman told MarketWatch he thinks the terminal rate — or high point — could be around 6%.

See: Mike Pence says inflation is 16%, but CPI is 3%. This is his logic.

The economy, for its part, has remained resilient and alleviated fears of a recession, at least this year. The Fed said economic activity was expanding “at a moderate pace,” a slight upgrade from the “modest pace” seen at the last meeting in June.

Once the Fed decides it does not need to raise rates further, Powell reiterated that the bank will hold rates at a restrictive level to allow inflation to continue to gradually come down. Economists generally don’t see any rate reductions until next spring.

“Whether or not the Fed hikes rates again may be beside the point. The important takeaways are that interest rates are likely to remain elevated for quite a while,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office.

Need to Know: Inflation is heading to zero, according to the one factor Jerome Powell absolutely will not discuss