The Federal Reserve has announced its biggest back-to-back interest rate hike since the 1980s. For the second time this year, the Fed tacked 75 basis points onto its benchmark rate, raising the target range to between 2.25 and 2.50 percent. This is the threshold for what is considered "neutral" monetary policy, and any future hikes will now be considered restrictive.

In other words, this is arguably a watershed moment for the Fed in its fight to bring down inflation, and economists and investors are bracing for what comes next. 

There are three more Fed meetings scheduled for this year, and projections show the Fed adding at least another percentage point to around 3.5 percent, which is in the range at which Powell said higher rates are likely to start impacting inflation. In the meantime, he noted that aggregate demand remains strong, and more data will be needed to see what policy is necessary. 

"While another unusually large increase could be appropriate at our next meeting, that is a decision that will depend on the data that we get between now and then," said Fed Chair Powell after the conclusion of the two-day Federal Open Market Committee (FOMC) meeting. 

Powell added, however, that it might be "appropriate to slow the pace of increases, while we assess how our accumulative policy adjustments are affecting the economy and inflation."

The FOMC statement announcing the rate increase largely stuck to the central bank's previous messaging around macroeconomic conditions — though it cut any mention of COVID-related shutdowns in China, which have subsided since its last meeting in June. 

"Russia’s war against Ukraine is causing tremendous human and economic hardship," it said.  "The war and related events are creating additional upward pressure on inflation and are weighing on global economic activity. The Committee is highly attentive to inflation risks."

The Fed's decision comes just one day before the release of the latest U.S. gross domestic product (GDP) numbers. In the first quarter of the year, GDP fell 1.6 percent. If it drops again, conventional wisdom says the U.S. economy is now in a recession, though some economists dispute that definition. 

The statement also noted that production and spending have "softened" in recent months, but job gains remain "robust."

In addition, the IMF on Tuesday lowered its global economic forecast to 3.2 percent growth for 2022, which is down 0.4 percent from its previous forecast. 

Powell, for his part, said he does not think the economy is headed for recession, and that monetary policy moving forward is "likely to involve a period of below-trend economic growth and some softening in labor market conditions, but such outcomes are likely necessary to restore price stability and set the stage for achieving maximum employment and stable prices for the long-run."

However, some Fed officials have warned that the headline number doesn't tell the whole story. 

In a speech earlier this month, Federal Reserve Governor Chris Waller said that while GDP has fallen, another measure, gross domestic income, has gone up. When this happens historically, he pointed out, the two numbers tend to converge at some point. 

He also emphasized that the job market is still historically robust. 

"It is often said that this is 'close to a half-century low' and that is true, but you really have to go back 69 years, to 1953, to find the unemployment rate more than a couple tenths of a point lower than it was in June," he said. "This is about as good a job market as any worker has ever seen."