The Federal Reserve has once again upped the ante in its fight against inflation. The central bank on Wednesday announced plans to raise its target interest rate by 75 basis points (or 0.75 percent) in an effort to tamp down on price increases. 
This is the Fed's single biggest rate increase since 1994 when both the economy and stock market were booming, and it marks a change of heart for Fed Chairman Jerome Powell, who previously said the central bank was not considering a hike above 50 basis points. 
A lot has happened since then, of course. The latest consumer price index showed inflation jumping a full percentage point in May, which brought the year-over-year increase to 8.6 percent and dampened hopes that inflation had begun to moderate. 
"By this point, we had actually been expecting to see clear signs of inflation at least flattening out and ideally beginning to decline," said Powell during a post-meeting press conference. "So contrary to expectations, inflation again surprised to the upside." 
In addition, U.S. Census data released this week showed retail sales falling 0.3 percent in May, as shoppers shifted their spending from durable goods to services. The labor market also remains tight, and wages are rising even as inflation eats into earnings. 
The Fed had already raised the Federal Funds Rate by a total of 75 basis points since it started tightening monetary policy earlier this year, beginning with a 25 basis point hike in March and following that up with a 50 basis point hike in May. 
Previous rate hikes were telegraphed ahead of time, with Powell and other Fed officials essentially broadcasting their intentions well before FOMC meetings.
Why the surprise this time? Powell said the Fed's decision-making was "data-dependent," and that it would continue to be "nimble" going forward. He also added that it's unusual for new data, in this case, the recent CPI numbers, to come out so close to a meeting. 
"Soon enough, we will be seeing some progress, at some point," he said. "I would like to think though that our guidance is still credible, but it's always going to be conditional  on what happens."
He said that either a 50 or 75 basis point was likely at the next meeting, but that large hikes would not become the new normal. "Clearly, today's 75-basis-point hike is an unusually large one, and I do not expect moves of this size to be common," he said.
In many cases, markets have moved ahead of the Fed, with the 30-year fixed-rate mortgage topping 6 percent this week, and U.S. Treasury yields surging past 3 percent.
On top of the rate increase, the Fed is also anticipating a slower-growing economy in the coming years. The median projection among FOMC members for GDP growth is now below 2 percent through 2024, whereas in March the committee saw 2.8 percent growth in 2022, 2.2 percent growth in 2023, and 2 percent growth in 2024.