Strategists suggest that the Fed's interest rate forecast indicates a readiness to prioritize inflation control over economic growth.

• As widely expected, the Federal Reserve increased interest rates by a quarter point.
• The central bank released an interest rate forecast that was slightly more aggressive than anticipated, indicating it may increase rates six additional times in 2022.
• The Treasury yield increased to 2% for the first time since May 2019, indicating the Federal Reserve's policy.

The Federal Reserve's forecast for aggressive rate hikes caused bond yields to rise and stock volatility.

The Fed raised its target fed funds rate by a quarter point, marking its first hike in over three years. Following the announcement, the stock market briefly turned negative, while bond yields rose.

During Jerome Powell's post-meeting press conference, the major averages fluctuated but eventually increased. The Dow finished more than 500 points higher in volatile trading.

Since May 2019, the rate that most closely mirrors Fed policy has surpassed 2% for the first time.

The Fed released its forecast on its "dot plot," showing the views of individual officials. The median forecast for 2022 was for seven hikes, with three more forecast for 2023 and none expected in 2024.

Though Wall Street economists predicted that policymakers would forecast between five and six hikes for this year, the futures market anticipated seven increases before the announcement.

According to Mark Cabana, head of U.S. short rate strategy at Bank of America, the signal from the dots is hawkish, indicating that the Fed is willing to sacrifice growth for inflation. To achieve this outcome, they must slow growth. The Fed forecasts that gross domestic product will grow at 4% this year before falling off to 2.2% in 2023.

The 10-year yield in the bond market reached a high of 2.246% but later dropped to 2.18%. The 2-year yield also decreased to 1.97%. Cabana stated that the yield curve was narrowing as anticipated, with the 2-year note leading the way.

An inverted yield curve, where the 2-year yield rises above the 10-year, can signal expectations for a weakening economy.

Cabana stated that the market is realizing the need for a more aggressive Fed, as it appears that the Fed was slow to acknowledge the severity of the inflation problem they face, and they are now recognizing it.

The central bank anticipates a core inflation rate of 4.1% in 2021, which will decrease to 2.6% in 2023. Additionally, the bank has released a projection for the personal consumption expenditure inflation index.

According to Michael Schumacher of Wells Fargo, the Fed's policy aims to rapidly decrease inflation.

In response to the pandemic, the Fed lowered its target fed funds rate to a range of zero to 0.25% in early 2020. The extraordinary easing effort also included other facilities to support markets and a quantitative easing bond purchase program aimed at keeping markets liquid.

The central bank announced it will end its bond purchases this month, and Powell stated at a press conference that it could begin shrinking the nearly $9 trillion balance sheet as early as May.

The Federal Reserve's earlier interest rate projection, released in December, predicted three rate increases in 2023, followed by three more in 2024.