The Federal Reserve raised interest rates on Wednesday in an effort to speed up the return to price stability. But while policymakers signaled that more tightening was ahead, they penciled in only a limited number of rate hikes in the coming months-even with inflation expected to remain above target for years.

At the conclusion of a two-day policy meeting, the Federal Open Market Committee voted to raise its target for the federal-funds rate by a quarter of a percentage point to 3.75% to 4%. It was the first time since December 2025 that the Fed changed interest rates, and the first increase since July 2023.

Chairman Kevin Warsh indicated that the rate increase was driven by underlying inflation failing to cool quickly enough toward the Fed's 2% target.

"Stable prices have been the problem now for more than five and a half years," Warsh said. "So what the committee decided to do today was take an action to ensure a timelier return to our price stability objective."

Warsh noted that he would be "hard-pressed" to describe the current state of financial conditions as restrictive, characterizing Wednesday's rate increase as removing a "dose of accommodation" currently available. The move was far from impulsive: Warsh called it a "sober" and "serious" action that the committee has been preparing for months.

The summary of economic projections, however, signaled limited appetite for further increases, with officials projecting just two in total this year-including Wednesday's-and none in 2027.

"The absence of projected increases in later years suggests officials see this as a targeted adjustment to the current inflation shock rather than the start of a longer tightening cycle," writes Brian Rehling, co-head of global fixed income and digital asset strategy at Wells Fargo Investment Institute.

The limited number of projected rate increases contrasts with the Fed's historical tightening cycles. The record shows that the Fed's tightening cycles have averaged about 22 months long and delivered 478 basis points of rate increases, on average, calculates Jim Reid, global head of macro and thematic research at Deutsche Bank.

But even with the expected tightening, policymakers still expect that it will take more than two years, until 2029, for inflation to return to target, according to the latest committee projections.

"Given percolating risks it could take a while for policymakers to hit their goal," writes Oren Klachkin, financial market economist at Nationwide.

It's worth noting, however, that Chairman Warsh did not provide his economic estimates and distanced himself from the 2029 timeline at Wednesday's press conference. He vowed that the Fed will lower inflation "on a timelier basis," but did not specify when.

"Those aren't my forecasters. Those are the forecasters of my 18 colleagues and I tried to represent them dutifully to you," Warsh said. "My business is to not give forward guidance, but my commitment...was to reaffirm to the American people, to anyone listening, that we will deliver price stability."

Warsh outlined three "key changes" since the July FOMC meeting that prompted the Fed to raise rates on Wednesday. The first was that the economic outlook had strengthened and the labor market showed increased stability.

He specifically pointed to strong August employment data showing unemployment holding at 4.1% and payrolls growing by 162,000.

Warsh took pains to highlight the strength of the U.S. economy, with the policy statement citing resilient consumer spending, strong productivity growth and robust capital investment. He also noted the Fed has a role in maintaining that economic strength.

"The Fed has a role in sustaining the economic progress happening in America right now, in the rising opportunities that come with it," Warsh said. "Those who are least well-off have the most to gain from a durable expansion, a solid labor market, and stable prices."

But inflation trends, Warsh said, still weren't "passing the test." Warsh also said that geopolitics were playing a role, noting the conflict in the Middle East showed few signs of cooling and oil was once again hovering at more than $100 a barrel.

Warsh did not shed much light on the recent bond market turbulence, even as the 10-year Treasury yield rose to its highest point since 2007 on Tuesday. During Wednesday's press conference, yields once again flirted with 5%, but Warsh sidestepped questions from reporters about whether the Fed rate increase was aimed at quelling bond market angst.