The U.S. Federal Reserve on Wednesday raised interest rates by 75 basis points, or three-quarters of a percentage point. It is the biggest rate hike in 28 years, part of an ongoing effort to bring down soaring inflation that has roiled the economy and markets from stocks and bonds to cryptocurrencies.

The U.S. central bank also announced it would continue reducing the size of its balance sheet at the rate announced in May, according to a statement by the Federal Open Market Committee (FOMC), which sets the Fed's monetary policy.

The Fed Funds rate, the range at which commercial banks can borrow and lend their excess reserves to each other overnight, will rise to a range of 1.5%-1.75%, according to the Fed. Bond traders are pricing in a range of 3.25%-3.5% by the end of the year, implying an unusually rapid and harsh pace of monetary tightening, according to Goldman Sachs.

"The current picture is plain to see," Federal Reserve Chair Jerome Powell said Wednesday at a press conference after the decision was announced. "The labor market is extremely tight, and inflation is much too high."

The last time the Fed raised its benchmark rate by 0.75 percentage point was in 1994. Powell said the U.S. central bank will not "declare victory" until officials see "compelling evidence" that inflation is coming down.

Exploring Bitcoin’s Relationship With Fed Rate Hikes

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Given that May’s Consumer Price Index measuring inflation came in hotter than expected, at a fresh four-decade high, markets already started reacting to the possibility of a faster rate hike in the days leading up to this week's Fed meeting. The closed-door meeting started on Tuesday and culminated with the statement on Wednesday at 2 p.m. ET.

"Markets loathe uncertainty and unpredictability," said Josh Olszewicz, head of research at Valkyrie. "A decrease in downward volatility will only likely be achieved with a pause or reversal of the current Fed policy and direction."

Bitcoin (BTC) was changing hands around $21,444 about an hour after the meeting, up from $21,076 when the decision was released. Most analysts had already priced in the hike in the days leading up to the meeting.

"Overall economic activity appears to have picked up after edging down in the first quarter," the Fed said in Wednesday's statement. "Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the [coronavirus] pandemic, higher energy prices, and broader price pressures."

During his press conference in May, Powell had ruled out the possibility of a 75 basis point hike, saying that it is “not something that the committee is actively considering.” Instead, central bankers had hinted at two 50 basis point hikes in June and July.

But the situation changed after the last Consumer Price Index report showed an acceleration in inflation to 8.6%, rather than a slowdown as expected. Powell had mentioned at his last conference that if the Fed didn’t see inflation pressures “abating” and “coming down,” the central bank would “consider moving more aggressively.”

Powell said Wednesday that last week's inflation surprise warranted “strong action at this meeting” rather than waiting another six weeks for the next gathering.

“We decided we needed to go ahead, and so we did,” Powell said. “We came to the view that we’d like to do a little more front-end loading on that.”

In addition to the statement, the Fed published revised quarterly economic projections, or “dot plot,” a pictorial representation of Fed officials' projections for the central bank's key short-term interest rate.

Members expect the fund’s rate to go up to 3.4% in 2022 and 3.8% in 2023.