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A full recap of the Fed's rate hike decision and Powell's market-moving comments

The Federal Reserve raised rates Wednesday for the first time since 2018. The central bank also unveiled its latest economic growth and inflation projections, while noting that it expects to raise rates six more times in 2022. Fed Chairman Jerome Powell then took questions from reporters, and his answers sparked sharp moves across financial markets. Here's a full recap below.

Powell says there is 'misalignment' in labor market but not a wage-price spiral

Powell said that the Fed doesn't see evidence of a wage-price spiral at the moment but there is a "misalignment" of supply and demand in the labor market.

"What we have now, if you look at the wage increases that we have ... the increases are running at levels that are well above what would be consistent with 2% inflation, our goal, over time," he said.

The idea of a wage-price spiral is one factor for how inflation becomes more persistent, with workers demanding higher wages to pay for more expensive items, thus driving prices up even more. The Fed Chair did say that some areas of the economy that saw hot wage growth last year appeared to be normalizing some now, suggesting that a spiral was not in effect.

Jesse Pound

Powell indicates balance sheet reduction could start in May

The Fed could start reducing the size of the holdings on its balance sheet as soon as May, Chairman Jerome Powell said.

In the post-meeting statement Wednesday, the Federal Open Market Committee indicated that the central bank "expects to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities at a coming meeting."

During his press conference, Powell provided some color on when and how that can happen. He noted that the FOMC made "exceptional progress" at this meeting in getting the process started, and he said implementation could come "at our next meeting in May."

"The framework is going to look very familiar to people who are familiar with the last time we did this," he said. "But it will be faster than the last time and of course it's much sooner in the cycle than last time."

Its last balance sheet reduction, from 2017-19, saw the Fed allow a set level of proceeds from maturing bonds to roll off each month while reinvesting the rest. Powell's comments indicate this time will be more aggressive than the $50 billion a month the Fed used in the prior case.

Years of bond buying have pushed the Fed's balance sheet to just shy of $9 trillion. Markets expect that to be cut by several trillion dollars in the coming iteration.

Balance sheet reduction could come at our next meeting, says Jerome Powell
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Balance sheet reduction could come at our next meeting, says Jerome Powell

Fred Imbert

Powell says price stability needed for sustained maximum employment

When asked if higher interest rates could potentially lead to higher unemployment rates, Chair Jerome Powell emphasized the Fed's focus on achieving price stability by addressing inflation.

"Without price stability, you really can't have a sustained period of maximum employment," Powell said. "The plan is to restore price stability while also sustaining a strong labor market. That is our intention and we believe we can do that. But we have to restore price stability."

We do understand very much our obligation to restore price stability, says Fed Chair Powell
VIDEO3:0703:07
We do understand very much our obligation to restore price stability, says Fed Chair Powell

—Hannah Miao

Big Tech jumps amid Powell comments

Shares of major technology companies jumped Wednesday as Fed Chairman Jerome Powell answered questions from reporters following the central bank's first rate hike in three years.

Facebook parent Meta Platforms popped nearly 4%, while Amazon and Netflix each gained more than 2%. Microsoft climbed 0.7%, and Apple advanced 1.4%.

Fred Imbert

Stocks seesaw as Powell speaks, Dow up more than 100 points

The major U.S. stock averages seesawed as traders listened carefully to Fed Chairman Jerome Powell's news conference.

The Dow, which briefly traded more than 100 points lower after the Fed statement was released, was up about 90 points as of 3 p.m. ET. The S&P 500 and Nasdaq were up by 0.9% and 2.1%, respectively.

Fred Imbert

Monetary policy starts to bite with a lag, says Fed Chair Powell

Monetary policy starts to bite with a lag, says Fed Chair Powell
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Monetary policy starts to bite with a lag, says Fed Chair Powell

Fred Imbert

Powell: 'We expect inflation to return to 2%'

The Federal Reserve expects inflation to return to 2%, but the comeback will take longer than initially expected, Fed Chairman Jerome Powell said during a press conference following the agency's rate hike decision.

"As we emphasize in our policy statement, with appropriate firming in the stance of monetary policy, we expect inflation to return to 2%, while the labor market remains strong," he said.

The median inflation projection among FOMC members is 4.3% for the year, Powell said. He noted that the trajectory through 2024 is "notably higher" than initial December projections.

— Samantha Subin

Powell: 'Every meeting is a live meeting'

When asked what would trigger the Fed to adjust the pace of its rate hikes, Chair Jerome Powell said the central bank could speed up its plans if more aggressive monetary tightening is needed.

"The way we're thinking about this is that every meeting is a live meeting," Powell said. "We're going to be looking at evolving conditions and if we do conclude that it would be appropriate to move more quickly to remove accommodation, then we'll do so."

"I can't be perfectly specific about it. But that's certainly a possibility as we go through the year," he added.

—Hannah Miao

Powell says chances of a recession are not 'particularly elevated'

While the U.S. economy faces a myriad of risks, including a massive surge in inflation, Fed Chairman Jerome Powell still thinks recession chances are low.

"The probability of a recession within the next year is not particularly elevated," Powell said. "Aggregate demand is currently strong, and most forecasters expect it to remain so."

"All signs are that this is a strong economy," he said.

The possibility of a recession is not particularly elevated, says Fed Chair Powell
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The possibility of a recession is not particularly elevated, says Fed Chair Powell

Fred Imbert

Fed to announce balance sheet reduction at a future meeting

Fed Chair Jerome Powell said the central bank is set to start reducing the asset holdings on its nearly $9 trillion balance sheet at a future policy meeting.

"We expect to announce the beginning of balance sheet reduction at an upcoming meeting," Powell said at the post-March meeting press conference.

"In making decisions about interest rates and the balance sheet, we will be mindful of the broader contexts in markets and in the economy, and we will use our tools to support financial and macroeconomic stability," he added.

Hannah Miao

Fed sees risks 'weighted to the upside' for inflation, Powell says

Chairman Jerome Powell acknowledged the big jump in inflation expectations from Fed officials, saying that "inflation is likely to take longer to return to our price-stability goal than previously expected." Powell added that "participants continue to see risks as weighted to the upside" on inflation.

Check out Powell's opening remarks below:

'We expect inflation to return to 2% while the labor market remains strong,' says Jerome Powell
VIDEO7:1807:18
'We expect inflation to return to 2% while the labor market remains strong,' says Jerome Powell

Jesse Pound

Raising interest rates too fast could freeze the economy, strategist says

While the Fed's projection of six more hikes this year is in line with expectations, the risk still exists that the central bank could tighten monetary policy too fast and hinder economic growth, according to Mike Loewengart, E-Trade's managing director of investment strategy.

"Keep in mind that the risk remains that attempting to tame inflation by raising rates crosses the line from cooling a too-hot economy to freezing it, which could pressure corporate earnings and, ultimately, stock prices," Lowerngart said.

"That said, the Fed raising rates means a vote of confidence that the economy is in shape enough to weather tighter policies," he added.

— Yun Li

Future rate hikes will come with caveats, HYCM's Coghlan says

The Fed expects to raise rates at each of its remaining meetings this year. However, future rate increases "will come with caveats," Giles Coghlan of HYCM said.

"We may see a more dovish approach to tightening, rather than the aggressive approach we have been primed for over the past year. But today, we traders and investors could see a 'buy the rumour, sell the fact' response to the announcement, which would favour upside in stocks, gains for gold and silver, as well as EURUSD upside and a drop in US 10 year yields," Coghlan said.

Fred Imbert, Tanaya Macheel

JPMorgan's David Kelly says projecting 6 more rate hikes in 2022 is too aggressive

Watch the full interview with JPMorgan's Kelly, Edward Jones' Mahajan and Western's Bellows
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Watch the full interview with JPMorgan's Kelly, Edward Jones' Mahajan and Western's Bellows

David Kelly, chief global strategist at JPMorgan Asset Management, told CNBC on Wednesday he believes the Fed is overdoing it by projecting six more interest rate hikes this year.

"I'm not surprised the Dow is down. I think this is a very aggressive move," he said on "Power Lunch," alluding to the fact the 30-stock average briefly went negative as investors processed the Fed's post-meeting statement.

"I just want the Fed to maintain some flexibility. In the long run, we have to get rates back to positive real levels," Kelly said. "But there's a lot of uncertainty out here, and remember we've got a lot of financial assets which are built on the edifice of super low rates, and you can't just raise those rates up to normal levels overnight and expect nothing bad to happen."

Kelly said he thinks the Fed should stretch out the rate-hike cycle and put more emphasis on reducing its balance sheet instead.

—Kevin Stankiewicz