Fed Raises Rates 0.75% For Third Straight Time: 'We Will Keep At It Until We're Confident The Job Is Done'

The SPDR S&P 500 SPY is volatile after the Federal Reserve on Wednesday raised its benchmark rate by 0.75% for the third straight time and indicated that it will continue to hike well above the current level. 

What To Know: The 0.75% rate hike brings the target fed funds rate up to a new range between 3% and 3.25%, the highest levels seen since before the 2008 financial crisis.

The Fed also said it will continue with its plan to let Treasury securities and agency debt and agency mortgage-backed securities roll off its balance sheet on a monthly basis.

"Recent indicators point to modest growth in spending and production. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures," the Fed said in an FOMC statement. 

All 12 Fed members voted unanimously in favor of the 0.75% hike.

Related Link: Federal Reserve Issues Third Straight 0.75% Interest Rate Hike: What It Means For The Struggling Stock Market

Why It Matters: In a press conference following the decision on rates, Fed chair Jay Powell reaffirmed the central bank's commitment to bringing inflation back down to its 2% goal. 

Price stability is essential, he said: "Without price stability, we will not achieve a sustained period of strong labor market conditions that benefit all."

FOMC participants expect supply and demand conditions in the labor market to come into better balance over time, easing the upward pressure on wages and prices. 

"There are some signs that some wage measures may be flattening out, but not moving up. Payroll gains have moderated, but not much," Powell said. 

Powell noted that the Fed continues to see risks to inflation "as weighted to the upside." Despite longer-term projections calling for a normalization in inflation, Powell said the Fed remains highly attentive to risks. 

"That is not grounds for complacency. The longer the current bout of high inflation continues, the greater the chance that expectations of higher inflation will become entrenched," Powell said. 

Following Wednesday's hike, the Fed has raised rates by a total of 3% in 2022.

"At some point, as the stance of monetary policy tightens further, it will become appropriate to slow the pace of increases, while we assess how our cumulative policy adjustments are affecting the economy and inflation," Powell said. 

The Fed will continue to make its decisions on a meeting-by-meeting basis, but the Fed chair noted that "the historical record cautions strongly against prematurely loosening policy."

"Restoring price stability is essential to set the stage for achieving maximum employment and stable prices over the longer run. We will keep at it until we're confident the job is done," Powell said.

SPY Price Action: The SPY was down 1.33% at $378.97 Wednesday afternoon.

Photo: courtesy of the Federal Reserve.