The decision to raise rates comes as the U.S. unemployment rate hovers at 3.8% - the lowest rate in almost two decades - and inflation, which lagged the Fed's 2% target for years, shows signs of starting to pick up.
The central bank raised the federal funds rate to a 1.75-2 percent target range, the second increase under Fed Chairman Jerome Powell.
The widely-anticipated decision will lift the target for the central bank's benchmark rate to 1.75%-2%, the highest level since 2008. The rate is closely tied to adjustable-rate loans, such as home-equity lines of credit and credit cards.More news: John Boyega gives ‘rude’ Star Wars fans a piece of his mind
A decade after the recession, the Fed has made progress on its objectives.
United States unemployment is already at 3.8 per cent, the lowest since 2000, and the Fed believes it will fall to 3.6 per cent by the end of the year, which would be the best rate since the 1960s. The Fed expects inflation higher than 2% over the next two years, according to its latest projections. "This is the most lopsided, mismatched labour market in the nation's history", said Chris Rupkey, chief financial economist at MUFG Union Bank. "The Fed is prepared to be quicker about pushing rates higher".
Press conference after every meeting would give the Fed more room to make decisions as the economy warrants, and to be less choreographed.
Federal Reserve Chairman Jerome Powell speaks at a news conference following the Federal Open Market Committee meetings in Washington, U.S., March 21, 2018. "This change is only about improving communications".More news: United Nations seeks urgent ceasefire to stop UAE assault on Yemeni port
In addition to a new dot plot, the Fed updated its forecasts for economic growth and inflation.
They see another three rate increases next year, a pace unchanged from their previous forecast. In the longer run, it maintained the forecast for 1.8% growth. Fed officials had been split about whether to raise rates three times this year or four. In its statement the central bank said that "economic activity has been rising at a solid rate". Paychecks aren't soaring, in other words, but at least most Americans are staying ahead of inflation.
The committee sees further declines the unemployment.
Investors were expecting the increase. Risks to the economic outlook appear roughly balanced. US payrolls expanded by more than 1 million workers in the first five months of 2018, reaching the milestone faster than in the previous two years. "The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation". This assessment will take into account a wide range of information, including measures of labour market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and worldwide developments.More news: Brazil tennis great Maria Bueno buried