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Jerome Powell has announced the biggest interest rate rise in 22 years and warned of further punishing increases to come as the US Federal Reserve battles to control rampant inflation in the world’s largest economy.

The central bank raised rates in America from 0.5pc to 1pc in its first increase of more than 0.25 points since 2000.

Mr Powell, the Fed chairman, admitted that inflation is “much too high” and said that further 0.5 point increases are likely to be needed within weeks.

Wall Street surged as markets cheered Mr Powell’s calming of nerves over a possible 0.75 point rise, with the S&P 500 closing 3pc higher in the biggest one-day jump since May 2020.

It comes as the Bank of England is expected to raise its own interest rate from 0.75pc to 1pc on Thursday as voters go to the polls in local elections.

The increase will pile further pressure on households already battling the highest price rises in 30 years and a series of tax increases.

Mr Powell said he hoped to avoid triggering a recession, arguing the economy’s “underlying momentum remains strong” despite GDP shrinking in the first three months of the year amid growing fears of stagflation.

“The current picture is plain to see: the labour market is extremely tight and inflation is much too high,” he said.

Very low unemployment, rising wages, and strong household and business finances mean the economy should be able to handle higher borrowing costs without a downturn, Mr Powell added.

There is “a chance to get wages down and inflation down without having to slow the economy and have a recession and have unemployment rise materially. There is a path to that,” the Fed chairman said. “We have a good chance to have a soft, or soft-ish, landing.”

The move follows March’s rise from 0.25pc. It marks the first rate rises at consecutive policy meetings since 2004, underlining a new urgency in efforts to tackle higher prices.

Mr Powell said: “My colleagues and I are acutely aware that high inflation imposes significant hardship, especially on those least able to meet the higher cost of essentials.”

To tackle this, he said policymakers are “on a path to move policy rate expeditiously to more normal levels.”

This means “additional 50 basis point increases should be on the table at the next couple of meetings.”

Inflation in the US is running at 8.5pc, a 40-year high stoked by heavy government spending, a strong jobs market and chaos in global supply chains.