U.S. Federal Reserve Chair Jerome Powell attends a press conference in Washington, D.C., the United States, on June 15, 2022. (Xinhua/Liu Jie)

The U.S. Federal Reserve on Wednesday raised its benchmark interest rate by 75 basis points, marking the sharpest rate hike since 1994, as data released in recent days showed no clear signs of easing in inflation.

"Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures," the Fed said in a statement after a two-day policy meeting, adding that the Fed is "highly attentive to inflation risks."

The Federal Open Market Committee (FOMC), the Fed's policy-making body, decided to raise the target range for the federal funds rate to 1.5 to 1.75 percent and "anticipates that ongoing increases in the target range will be appropriate."

The statement showed that 10 committee members voted for the decision and one voted against it. Esther George, president of the Federal Reserve Bank of Kansas City, preferred a half-point rate hike.

At the committee's meeting in May, there was a broad sense that a half percentage point increase in the target range should be considered at this month's meeting if economic and financial conditions evolved in line with expectations, Fed Chair Jerome Powell said Wednesday afternoon at a press conference.

"Since then, inflation has again surprised to the upside, some indicators of inflation expectations have risen, and projections for inflation this year have been revised up notably," said Powell. "In response to these developments, the committee decided that a larger increase in the target range was warranted at today's meeting."

The U.S. Labor Department reported Friday that the consumer price index skyrocketed 8.6 percent in May from a year earlier, marking the third straight month of inflation over 8 percent and hitting a new four-decade high. The figures, which exceeded consensus estimates, dashed hopes that inflation had peaked.

On Monday, a survey by the Federal Reserve Bank of New York showed that the median one-year-ahead inflation expectation increased to 6.6 percent in May, up from 6.3 percent in April. Household spending expectations over the next year, meanwhile, rose by 1.0 percentage point to reach 9.0 percent, a new series high.

Powell noted that the 75 basis point increase was an unusually large one, and "I do not expect moves of this size to be common." A 75 basis-point rise triples the usual move.

"From the perspective of today, either a 50 or 75 basis point increase seems most likely at our next meeting," said Powell, leaving the door open for another 75-basis-point rate hike. The Fed chair noted that the committee would like to do a little more "front-end loading."

"The 75 bps rate hike by the FOMC today - the largest in 27 years -demonstrates the committee's growing concern over inflation as well as its increased commitment to restore price stability," Sarah House and Michael Pugliese, economists at Wells Fargo Securities, wrote in an analysis.

Adam Posen, president of the Washington-based think tank Peterson Institute for International Economics, told Xinhua that what matters most is "how high the Fed has to go" to control inflation.

"The speeding up or front-loading of hikes makes little difference to recession risk," Posen said.

"If they raise the projected terminal rate of this hiking cycle from around 3 percent to more than 4 percent, that indicates that they may need a recession to bring down inflation," Posen said.

The Fed's newly released quarterly economic projections showed that Fed officials' median projection of personal consumption expenditures (PCE) inflation is 5.2 percent in the fourth quarter of this year, up from 4.3 percent in March projection. Median projection of PCE inflation falls to 2.6 percent by 2023, and to 2.2 percent by 2024.

The median FOMC projection for federal funds rate at the end of this year has jumped to 3.4 percent, much higher than the 1.9 percent projected in March. Median projection for 2023 year-end federal funds rate is 3.8 percent.

"The committee's views are around a modestly restrictive stance which will be in the 3 - 3.5 percent range by the end of the year," Powell told reporters.

"If we see data going in a different direction, it will be reflected in our policy, as you see today," he added.

Fed officials' median projection of unemployment rate, meanwhile, is 3.7 percent in the fourth quarter of this year, slightly up from the current 3.6 percent. The median projection of unemployment rate is 3.9 percent by 2023 and 4.1 percent by 2024.

"If you're looking at getting that back down to almost a 2 percent inflation by 2024 and the unemployment rate is as low as 4.1 percent, I would call that as meeting that test (of a soft landing)," Powell told reporters.

Yelena Maleyev, economist at the major accounting firm Grant Thornton, however, said in a recent blog that her team expects the unemployment rate to rise above 5 percent before inflation is tamed.

The quarterly economic projections also showed that Fed officials' median projection of GDP growth in the fourth quarter of 2022 is 1.7 percent, much lower than the 2.8 percent projected in March.

Despite aiming to move policy into restrictive territory by year-end, the economic projections "continues to paint a rather optimistic picture of the economy ahead," House and Pugliese said.

"In our view, it will take a more material slowdown in economic growth to bring core inflation back to the FOMC's 2 percent target and more damage is likely to be inflicted to the labor market," they said.

Desmond Lachman, senior fellow at the American Enterprise Institute and a former official at the International Monetary Fund, told Xinhua markets have declined sharply over the last few days, which is going to "create the conditions for a hard landing later this year."