The Federal Reserve said it would increase its key interest rate by three quarters of a percentage point to a range of 1.5% to 1.75%.
The rise, the third since March, comes after inflation in the US surged unexpectedly last month.
More hikes are expected, adding to the uncertainty facing the economy.
Forecasts released after the meeting showed officials expect the rate the Fed charges banks to borrow could reach 3.4% by the end of the year, the moves rippling out to the public in the form of higher borrowing costs for mortgages, credit cards and other loans.
As central banks around the world take similar steps, it marks a massive change for the global economy, where businesses and households have enjoyed years of low borrowing costs.