To Fight Sky-High Inflation, the Federal Reserve Just Raised Interest Rates Three Times Faster Than Usual — And the Most Since 1994 The increase marks an escalation of the central bank's effort to cool the highest inflation since 1981.

The Federal Reserve escalated its fight against inflation again on Wednesday, passing the largest one-time rate increase since 1994.

The central bank lifted its benchmark interest rate by 0.75 percentage points following the conclusion of its June policy meeting. The rate's range now sits between 1.50% and 1.75%, matching the range seen just before the pandemic crash of early 2020. The hike marks the Fed's first 75 basis point hike since 1994 and escalates policymakers' more aggressive effort to cool inflation.

"The Committee 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 Fed said in a statement.

Related: Fed Approves First Interest Rate Hike Since 2018. And There's More to Come

The hike was approved by 10 of the committee's 11 voting members, with Kansas City Fed President Esther George voting against the increase. It follows a half-point hike approved in the May meeting and a quarter-point increase in March that kickstarted the current hiking cycle.

Markets had priced in a 0.75 point hike by the end of a volatile Monday trading session that saw stocks plummet amid fears of an overly aggressive Fed. The Treasury market is largely expecting a 0.75 point hike from the FOMC's meeting in July. Traders generally see the benchmark rate ranging between 3.25% and 3.50% by the end of the year.

Investors had been anticipating another half-point hike from the June meeting, but hotter-than-expected inflation data published Friday raised concern that the Fed will have to act even faster. US inflation accelerated to a year-over-year pace of 8.6% in May, according to the Consumer Price Index, surpassing the average forecast of a 8.3% pace and marking the fastest price growth since December 1981. The uptick erased any hope that March represented peak inflation and hinted that solving the price-growth problem could be harder than previously expected.

By supporting another larger-than-usual rate hike, the committee is betting the economy is strong enough to continue recovering without support from the low rates the Fed adopted in the early months of the pandemic.

Various signals back that outlook. The US added 390,000 jobs last month, surpassing forecasts and bringing the country even closer to a full payroll recovery. Spending at retailers and restaurants edged slightly lower but remained elevated in May. Filings for unemployment insurance sit at pre-crisis levels, suggesting layoffs are far from widespread. Inflation may be weighing on Americans, but the recovery continued its charge into the summer.

Policymakers also published their latest set of quarterly economic projections. The committee's median forecast for one-year inflation in 2022 rose to 5.2% from 4.3%, signaling the Fed sees inflation proving harder to cool than last anticipated. Price growth is then expected to slow to 2.6% in 2023 and 2.2% the following year.

The committee's median forecast for the unemployment rate in 2022 rose to 3.7% from 3.5%. The rate is then seen rising to 3.9% in 2023 and 4.1% the following year. The outlook suggests the Fed's efforts to cool inflation will have some adverse effects on the labor market.

The projections also show policymakers expecting to cut interest rates starting in 2024. The "dot plot" that details individual members' rate expectations shows the benchmark rate rising above neutral levels and into restrictive territory in the coming months. The projected cuts in 2024 suggest the FOMC will return to a more accommodative stance once inflation returns to more sustainable levels.