Chair Jerome Powell said the U.S. 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 told a press conference on Wednesday in Washington after the Federal Open Market Committee raised its benchmark rate by 50 basis points to a 4.25 per cent to 4.5 per cent target range. Policymakers projected rates would end next year at 5.1 per cent, according to their median forecast, before being cut to 4.1 per cent in 2024 — a higher level than previously indicated.

Powell said that the size of the rate increase delivered on Feb. 1 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 per cent in a sustained way,” he said. “Restoring price stability will likely require maintaining a restrictive policy stance for some time,” he said.

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Treasury yields rose, the S&P 500 index dropped and the dollar index pared losses on the day as Powell spoke.

“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 per cent 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 per cent in May, followed by cuts totaling 50 basis points in the second half of the year.

The vote was unanimous.

“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. 

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.

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 U.S. 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 per cent, according to median projections released Wednesday. They raised their estimate for 2022 GDP slightly to 0.5 per cent. The central bankers increased their projection for the unemployment rate next year to 4.6 per cent from its 3.7 per cent level in November.

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

Fed officials raised their estimates for the main and core readings of their preferred inflation gauge, the index for personal consumption expenditures. They now see PCE at 3.1 per cent in 2023 compared with a September estimate of 2.8 per cent, while core — which excludes food and energy — may be 3.5 per cent for next year.

Wednesday’s move caps a challenging year for the U.S. central bank which was initially slow to begin tightening policy in response to surging price pressures.

Since lifting rates from near zero in March, the Fed has moved aggressively to catch up, while preserving hope it can deliver a soft landing that avoids a dramatic surge in unemployment.

Officials are seeking to slow growth to below its long-term trend to cool the labor market — with job openings still far above the number of unemployed Americans — and reduce pressure on prices that are running well above their 2 per cent target.

Policymakers got some good news Tuesday when government data showed consumer prices rose 7.1 per cent in the year ending November, the lowest rate this year.

Even so, Powell has repeatedly said he’s willing for the economy to suffer some pain to lower inflation and avoid the mistakes of the 1970s when the Fed prematurely loosened monetary policy.