Fed Chair Jerome Powell warned of stubborn inflation, further rate hikes, and a greater risk of recession. Here are the 5 key takeaways from his press conference.

• The Federal Reserve hiked interest rates by 75 basis points to a range of 3.75% to 4% on Wednesday.
• Fed Chair Jerome Powell said rates would continue rising to a higher peak than previously expected.
• Stubborn inflation means higher rates are needed, raising the risk of a recession, he said.

The Federal Reserve hiked interest rates by 75 basis points to a range of 3.75% to 4% on Wednesday, as it continued its campaign to bring down inflation from close to a 40-year high.

The US central bank's head Jerome Powell warned there's still upward pressure on prices, dashed investors' hopes of a pivot to cutting rates anytime soon, and cautioned the risk of a recession has grown. Here are the five key takeaways from the Fed chair's press conference:

1. Inflation still looms large

Powell highlighted some signs of the inflation threat waning, including slower growth in consumer spending and the sharp downturn in the housing market recently.

However, he emphasized the labor market remains extremely tight, with unemployment at a 50-year low, widespread vacancies, elevated wage growth, and robust monthly growth in job numbers.

The Fed expected goods inflation to slow once the shortages, shutdowns, and shipping delays during the pandemic were resolved. Yet that hasn't really happened, Powell said.

"There's no sense that that inflation is coming down," he noted, adding that Russia's war with Ukraine has driven up the prices of energy and food, exacerbating the problem.

Moreover, Powell said a high level of household savings and a strong labor market would likely mean it takes longer for the Fed's tighter monetary policy to rein in price increases.

2. The Fed will stay the course

Powell dismissed the idea that the Fed has hiked rates too quickly, noting inflation is still well above the Fed's benchmark interest rate. "I don't have any sense that we've overtightened or moved too fast," he said.

The Fed chief underscored the need to keep tightening, and said a halt to rate increases wasn't imminent.

"We still think there's a need for ongoing rate increases and we have some ground left to cover here, and cover it we will," he said. "It's premature to discuss pausing, and it's not something that we're thinking about."

He also underscored the dangers of letting inflation run riot, as it fosters uncertainty in the economy and erodes people's purchasing power.

"The historical record cautions strongly against prematurely loosening policy," he said. "We will stay the course, until the job is done."

More positively for investors, Powell suggested the speed of rate increases could slow as soon as December.

"At some point it will become appropriate to slow the pace of of increases," he said. "That time is coming, and it may come as soon as the next meeting or the one after that."

3. Rates will peak higher

Powell said he expects a higher terminal interest rate than he did a couple of months ago, based on economic data in recent weeks.

"The strong labor market report, but particularly the CPI report, do suggest to me that we may ultimately move to higher levels than we thought at the time of the September meeting," he said, referring to the consumer price index, an inflation gauge.

The Fed has previously signaled rates could approach 5% next year; Powell's latest comments suggest they may well exceed that level.

4. Better safe than sorry

Powell argued the risk of going overboard with rate hikes was overshadowed by the danger of doing too little.

The Fed showed during the pandemic that it can strongly support economic activity if needed, he noted. It will have a harder time curbing inflation if it goes unchecked too long and becomes entrenched, he said.

Inflation becomes entrenched when business start raising prices and employees begin demanding higher wages in anticipation of it, creating a self-fulfilling prophecy.

Powell also underscored that the longer inflation pervades, the greater the increase in unemployment it's likely to cause.

5. A recession looks more likely

Powell warned the pace and scale of the Fed's rate hikes have created a tougher path for the US economy to avoid a recession and achieve a soft landing.

"Has it narrowed? Yes," he said. "Is it still possible? Yes."

"The inflation picture has become more and more challenging over the course of this year without question," he continued. "That means that we have to have policy be more restrictive, and that narrows the path to a soft landing."