Investors have been betting the Federal Reserve is at the start of a series of interest-rate increases. On Wednesday, Chairman Kevin Warsh gave them little reason to think otherwise.

The Fed raised rates for the first time in three years, and officials penciled in at least one more increase this year. Warsh said the quarter-point move "removed a dose of accommodation." In central-bank parlance, accommodation means stimulus, so the phrase suggested officials don't think rates are restraining the economy even after lifting them.

Warsh also listed geopolitics-a euphemism for the Iran war and the energy shock it has caused-among three developments since July that led to Wednesday's decision. "There's no hiding from hot spots around the world," he said. Officials had changed their judgment about how those conflicts were likely to unfold, suggesting they no longer see the energy shock as a disruption to wait out, he said.

"If you don't even think you're restrictive and oil isn't going anywhere, you've got some work to do," said Michael Gapen, chief U.S. economist at Morgan Stanley. After the meeting, he revised his forecast to anticipate a total of three rate increases, including Wednesday's, up from two. The yield on the 2-year Treasury note, which is highly sensitive to expectations for Fed rates, rose to its highest level in more than two years.

Warsh presented his view of policy as one the rate-setting committee shared. Warsh's framing suggested that the two hikes officials had penciled in for the year, which includes the one delivered Wednesday, are "likely a down payment on what might need to be a much more prolonged policy tightening cycle," said James Egelhof, chief U.S. economist at BNP Paribas.

Officials also nudged up their projections for inflation and for the neutral rate, the setting that neither speeds up nor slows the economy. Those revisions mean that Wednesday's increase reflected a Fed raising rates just to stay in the same place it had been in June.

Warsh played down that yardstick at a news conference. He called the neutral rate useful academically but said it had no "operational effect on decisions that we make today."

He didn't say whether more increases were coming, leaving investors to guess whether the Fed moves again at its next meeting in late October. Gregory Peters, co-chief investment officer at PGIM Credit, said he sees the increase as the start of a path rather than a one-time adjustment. Unless inflation data change course, he said, "I think it's hard to say they won't move" next month.

The committee was more united than it had been in months. At the July meeting, when the Fed held rates steady, three officials dissented in favor of raising them. In June, at Warsh's first meeting as chairman, the officials' projections showed a clear split over whether hikes would be needed this year.

On Wednesday, the vote to raise rates was unanimous, and 16 of the 18 officials who submitted projections penciled in at least one more increase this year. Diane Swonk, chief U.S. economist at KPMG, called the vote "a much needed affirmation of the Fed's independence."

President Trump, who picked Warsh after spending months lambasting his predecessor, Jerome Powell, for not cutting rates faster, said Wednesday evening that he was standing by the chairman, who he said has "a very tough board."

Trump also said he had spoken with Warsh at some point before the meeting. "I talked to Kevin. I said, 'You might as well vote with the board because it's not going to matter,'" Trump said. "I said, 'Do what you want.'"

At his news conference, Warsh declined to discuss his conversations with the president but said the choice to raise rates had been "one that we have been preparing for and thinking about" since he arrived at the Fed in May. He called it a "sober," "serious," and "responsible" decision.

The press conference marked a change in tone from July, when Warsh said little about what would prompt the Fed to raise rates, and long-term Treasury yields rose as he spoke. This time, he walked through the data and listed what had changed since the last meeting, sounding more like previous Fed chairs, Swonk said.

Egelhof called it "an aggressive effort to turn around the credibility narrative" helped by projections that showed a unified effort. "Knowing you're leading a group that is behind you is a lot easier than trying to stitch together a consensus story for a group that really doesn't have a consensus," he said.

The unanimity reflected a shift in how officials see inflation. Earlier this year, several suggested the energy shock would fade and the Fed could wait it out, as they did with tariffs last year. Oil eased for a time, and some officials pointed to cooler inflation over a three-month stretch. Others worried the shocks were compounding and could no longer be assumed to pass on their own.

Crude has since climbed back to around $100 a barrel, and diesel and other refined products have risen further. Officials have "reached the acceptance stage of grief on there being a bit of a moderate but a persistent inflation problem," Egelhof said.

Private forecasters are reaching the same conclusion. Julia Coronado, founder of MacroPolicy Perspectives, said her firm had expected inflation to step down sharply next year as the effects of tariffs and higher energy prices faded. "They're not fading," she said, in part because the war has outlasted forecasts that it would end by August since forecasters assumed the alternative would be too damaging to the economy. The firm is raising its 2027 forecast for underlying inflation.

She is also concerned about the start of the year, when many businesses reset prices, and about increases spreading. "There's so many things that are getting more expensive that any business or any consumer is thinking about inflation all the damn time," she said.

How much higher rates must go to stop that spread is unclear, and Warsh didn't guess. He said the Fed needn't "do harm to the labor markets" to bring inflation down. But he acknowledged that higher rates can't lower oil prices. And much of the AI investment boom is largely insensitive to borrowing costs.

If inflation stays elevated and the Fed sees tighter policy as the only remedy, Morgan Stanley's Gapen said, the likely channel is falling asset prices. "The first thing to go would likely be financial prices and then maybe consumption."

Fed tightening campaigns have often continued until something gave way. In 2018, a late-year stock selloff helped persuade officials to end a mild rate-hike campaign designed to pre-empt inflation, which had only just reached 2% after years below it. In 2023, the collapse of Silicon Valley Bank, which touched off a broader regional banking scare, came a year into the Fed's most aggressive increases in four decades to combat very high inflation.

Some bankers say the squeeze has begun. Frank Sorrentino, chief executive of ConnectOne Bancorp, a New Jersey-based lender, said before the meeting that outside of energy and AI, his customers were reporting slower sales, fewer bookings and rising costs. With 10-year Treasury yields around 5% and mortgage rates near 7%, housing, car purchases and discretionary spending were already cooling, he said.

Higher rates wouldn't touch the AI companies raising huge sums, he said: "Do you think they care whether rates are up 50 or 75 basis points?" The burden would fall on households and businesses already under strain, he said.

The alternative carries its own risk. After more than five years above target, inflation could become entrenched as businesses and households come to expect it. The economy, Gapen said, "can handle modestly firmer policy rates without putting the expansion at risk."