“Every meeting is a live meeting,” said Fed Chairman

Jerome Powell

at a news conference on Wednesday. “If we conclude it would be appropriate to raise interest rates more quickly, then we’ll do so.”

In a statement following its two-day meeting, the Fed hinted at rising concern about inflationary pressures. It said inflation has been high due to “broader price pressures” and added that the war in Ukraine and “related events are likely to create additional upward pressure on inflation,” the statement said.

The rate-setting Federal Open Market Committee approved the decision on a 8-to-1 vote, with St. Louis Fed President

James Bullard

dissenting in favor of a larger half-percentage-point increase.

The statement also signaled that the Fed could soon announce and implement a plan to shrink its $9 trillion asset portfolio. The central bank ended a long-running asset-purchase stimulus program last week.

New projections show most officials expect the fed-funds rate to rise to at least 1.875% by the end of this year, according to the median of 16 officials, to around 2.75% by the end of 2023 and to hold rates there in 2024. That implies a total of seven quarter-percentage-point increases this year and another three or four next year.

That is a much faster pace than officials had projected in December, when most officials penciled in three quarter-percentage-point rate increases for this year, and considerably quicker compared with a series of nine interest rate increases between 2015 and 2018. It would be closer to the 2004-2006 period, when the Fed raised rates 17 times in succession.

Seven officials projected the Fed would need to raise rates at a pace that would imply at least one of their moves this year would be a half-percentage-point increase.

The fed-funds rate, an overnight rate on lending between banks, influences other consumer and business borrowing costs throughout the economy, including rates on mortgages, credit cards, saving accounts, car loans and corporate debt. Raising rates typically restrains spending, while cutting rates encourages such borrowing.

How much other interest rates rise will depend on how investors, businesses, and households respond.

The Fed’s decision Wednesday marked a sharp reversal from just two years ago, when it lowered rates to near zero and launched a suite of programs to steady markets and support the economy as Covid-19 shut down large swaths of the economy. The pandemic triggered a severe two-month recession in 2020 and record job losses.

Since then, economic output has recovered amid massive federal stimulus and vaccinations, and inflation surged one year ago. The recent episode has been a far cry from the seven years of near-zero interest rates the Fed maintained after the 2008 financial crisis.

Inflation rose 6.1% in January from a year earlier, according to the Fed’s preferred gauge. Core inflation, which includes food and energy, rose 5.2%. Most officials now see core inflation ending the year at 4.1%, up from their forecast of 2.7% in December. They see interest-rate increases bringing inflation down further, to 2.6% at the end of 2023 and to 2.3% the year after.

Even before Russia’s invasion of Ukraine three weeks ago, Fed officials had turned uneasy at the prospect inflation might not diminish as rapidly as they had been expecting a few months ago. U.S. labor markets have tightened rapidly, with the unemployment rate falling to 3.8% in February and annual wage growth running at near its highest pace in years.

Now, officials are facing the prospect of even higher inflation due to escalating sanctions by the West against Moscow, which risk higher energy and commodity prices, together with new pandemic lockdowns in China that further roil battered global supply chains.

Interest-rate futures markets show investors already expect the Fed to raise rates at its next two meetings, in May and June.

Mr. Powell earlier this month laid the groundwork for the possibility of raising rates by a half-percentage point at a time later this year, rather than in all quarter-point increments. He also suggested the Fed might need to eventually raise rates to a level designed to deliberately slow economic growth.

Economists say there’s a growing risk that Mr. Powell could feel pressure to lift rates to levels that tip the economy into recession. That would especially be the case if policy makers conclude that consumers’ and businesses’ expectations of future inflation are rising or if officials see growing evidence of a wage-price spiral in which workers coping with climbing prices demand more pay increases, leading businesses to continue raising prices.

Fed officials face three important questions as they consider their next moves. First, how quickly do they need to raise rates to an estimated “neutral” level that neither speeds nor slows growth? Second, has that neutral level increased as rising inflation sends down real, or inflation-adjusted, borrowing costs? And third, if and when will the Fed needs to raise rates above neutral to deliberate slow growth?

At the end of last year, many Fed officials thought they might just need to raise the fed-funds rate to a neutral level. Most officials estimate that is between 2% and 3% when underlying inflation—stripped of idiosyncratic influences such as from supply shocks—is at the Fed’s 2% target.

Some economists are warning that a period of higher inflation could force the Fed to raise the rate to the 4% to 5% range that prevailed in the two decades before the 2008 financial crisis. This might come as a surprise to investors that have bid up real estate, stocks, bonds and other assets counting on perpetually low inflation and interest rates.

The central bank has been telegraphing its shift towards raising rates several times this year, and already, mortgages and other borrowing has grown more expensive. The average 30-year fixed-rate home loan climbed above 4.25% last week, according to the Mortgage Bankers Association, an increase of nearly a full percentage point since late last year, and lenders said rates have climbed even higher in recent days.

Write to Nick Timiraos at nick.timiraos@wsj.com