The Federal Reserve continued its campaign of aggressive interest rate increases Wednesday, hiking its rate target another 0.75 percentage point, while acknowledging for the first time that "recent indicators of spending and production have softened."

Why it matters: The Fed's tightening of monetary policy, the most rapid in decades, is intended to bring down inflation. It has also sent financial markets reeling and increased the risk the United States will fall into a recession.

Driving the news: At the end of a two-day policy meeting, the Federal Open Market Committee raised its target for short-term interest interest rates to 2.25% to 2.5% range, the highest since 2019. It is the fourth rate hike this year.

• Fed officials have signaled more rate increases are on the way, with the policy committee stating again that it "anticipates that ongoing increases in the target range will be appropriate."
• But they elected not to raise rates by a full percentage point at this meeting, as some analysts thought they might in the aftermath of a very high reading on the June inflation two weeks ago.
• As of mid-June, leaders of the central bank expected rates to rise about another full percentage point, to the mid-3% range, by the end of the year.

Between the lines: The language in the statement about spending and production indicators softening is the most explicit acknowledgement yet from the Fed that the economy is slowing.

• The rate increase campaign is intended to slow demand, so in that sense softening spending reflects the Fed's policies achieving their goal.
• But the statement also noted that "job gains have been robust in recent months, and the unemployment rate has remained low," repeating language from past months.

What they're saying: Fed chair Jerome Powell told reporters that he does not believe the U.S. economy is currently in a recession: "There's just too many areas of the economy that are performing too well," Powell said, referring to the labor market.

• "We're not trying to have a recession, and we don't think we have to," Powell said, though he admitted that the path to a "soft landing" has gotten more narrow and could get narrower still.

What to watch: What the Fed will do in the months ahead is less clear. Powell told reporters that the central bank will be evaluating how much further to raise rates on a "meeting-by-meeting basis," as it watches incoming economic data for signs that inflation is slowing down.

• Powell said another "unusually large" rate increase could be in the cards at the next meeting. Still, he doesn't expect to give the kind of "clear guidance" as the Fed has in previous months.
• "These rate hikes have been large and they've come quickly, and it's likely that their full effect has not been felt by the economy so there's probably some additional tightening significant additional tightening in the pipeline," Powell said.

Of note: The stock market reacted positively to Powell's comments that suggested the Fed will slow the pace of its interest rate hikes.

• The S&P 500 shot up as Powell started talking to reporters, rising by over 3%. The Nasdaq Composite rallied too, jumping over 4%.

Wednesday's interest rate decision was unanimous, including votes from newly installed Fed officials Michael S. Barr, confirmed by the Senate this month to be a vice-chair, and Susan M. Collins, who started work as president of the Boston Fed on July 1.

Go deeper: How Americans will feel the squeeze from higher interest rates

Editor's note: This story has been updated with new details throughout.