The Federal Reserve on Wednesday went ahead with a widely anticipated 75 basis point rate hike, while hinting that moderation could be on the horizon. While the super-sized increase was no surprise, investors had their ears perked up for any signs of a shift in policy, and the Federal Open Market Committee (FOMC) arguably delivered. 
The committee, which determines the Fed's benchmark interest rate, dropped a whole new sentence into its usually formulaic policy statement: "In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments."
In Fed speak, this is potentially a huge qualifier. It suggests the central bank is looking at more than just the inflation rate to determine its future policy decisions, and that it is also trying to account for the cumulative impact of previous hikes and lags in the impact of monetary policy before moving ahead with additional increases. 
Fed Chair Jerome Powell echoed this sentiment during his post-meeting speech. "At some point, it will become appropriate to slow the pace of increases. So that time is coming, and it may come as soon as the next meeting or the one after that." 
The stock market rallied briefly following the statement's release, but seesawed after Powell's comments that interest rates may need to go higher than previously expected. "We still have some ways to go, and incoming data since our last meeting suggests that the ultimate level of interest rates will be higher than previously expected," he said.  
In explaining how the Fed is thinking about the balance between raising rates and anticipating potential lags in monetary policy, Powell stressed that the situation was "highly uncertain," and that it was better to do too much than too little. 
"If we were to overtighten, we could then use our tools strongly to support the economy," he said. "Whereas if we don't get inflation under control because we don't tighten enough, now we're in a situation where inflation does become entrenched." 
However, he said the Fed doesn't have a standard for when inflation becomes entrenched. "We don't have a clearly identified, scientific way of understanding at what point inflation becomes entrenched, and so the thing we need to do, from a risk management standpoint, is to use our tools forcefully but thoughtfully and get inflation under control."
On the labor market, Powell said higher wages are not the primary driver of inflation and that he doesn't see evidence of a wage-price spiral. He also said that data indicates that the labor market can soften without increased unemployment but through a decline in the number of job openings. 
These comments came one day after a federal report showed an uptick in the number of job openings to 10.7 million in September.