Fed raises rates half a percentage point, its largest increase since 2000.

The Federal Reserve raised interest rates by a half percentage point and announced a plan to shrink its massive bond holdings, decisive measures aimed at tamping down the fastest inflation in four decades.

Wednesday’s move marked the Fed’s largest interest rate increase since 2000, and by shrinking its nearly $9 trillion balance sheet at the same time, the Fed is rapidly withdrawing support from the economy. Together, the policies are likely to ricochet through markets and the economy as money becomes more expensive to borrow.

The quick pullback of monetary help is a sign that the central bank is getting serious about cooling down the economy and job market as rapid inflation persists and as officials grow nervous that it could become more permanent. Prices have been climbing at the fastest pace in 40 years for months now.

Policymakers spent much of 2021 hoping that inflation would ease on its own as supply shortages moderated and as the economy evened out following early-pandemic disruptions. But normalcy has yet to return, and inflation has only accelerated. Now, fresh pandemic-related lockdowns in China and the war in Ukraine are further elevating prices for goods, food and fuel. At the same time, workers are in short supply and wages are rising rapidly in the United States, feeding into higher prices for services as consumer demand remains strong.

The “lockdowns in China are likely to exacerbate supply chain disruptions,” and the invasion of Ukraine “and related events are creating additional upward pressure on inflation and are likely to weigh on economic activity,” the Federal Open Market Committee statement for May said. “The committee is highly attentive to inflation risks.”

The Fed reiterated that “inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures.”

Fed officials have decided that they no longer have the luxury of waiting for inflation to moderate on its own, and are expected to continue raising rates at their meetings throughout the year, with many investors expecting large increases in June and July. Some officials have even signaled that a 0.75 percentage point move could be possible, though it is not clear how much appetite there is for such a plan.

While the Fed acknowledged that inflation may remain fast as China supply disruptions and the war in Ukraine exacerbate price pressures, some analysts doubted that would warrant an even larger move.

“What they are trying to do is tell the market — inflation could be higher in the near term,” Gennadiy Goldberg, a rates strategist at TD Securities, said of the Fed’s Ukraine and China references. “It doesn’t suggest that they should be hiking 75 basis points, because this isn’t the type of inflation the Fed can control.”

Deciding how quickly to remove policy support is a fraught exercise. Central bankers are hoping to move decisively enough to arrest the pop in prices, without curbing growth so aggressively that they tip the economy into a painful recession. Yet engineering a so-called soft landing is likely to be a challenge.

Jerome H. Powell, the Fed chair, will answer reporter questions at 2:30 p.m.

The Fed plans to shrink its balance sheet starting in June by allowing securities to mature without reinvestment. It said on Wednesday that it will ultimately let up to $60 billion in Treasury debt expire each month, along with $35 billion in mortgage-backed debt. That plan will have phased in fully as of September.

The Fed’s plan to reduce its holdings is likely to take steam out of financial markets and could help to cool the housing market as it lifts longer-term borrowing costs, reinforcing the effect of the central bank’s interest rate increases. The Fed’s anticipated moves have already begun to push mortgage rates higher.