The Fed's short-term policy rate, a benchmark for a host of other borrowing costs, is now roughly equal to the rate of inflation, a breakthrough of sorts in the central bank's battle in recent years to return monetary policy to a normal footing.
And a majority of policy makers said they now expect a total of four interest rate increases this year. Prices did not spike in response to the enormous monetary stimulus, nor has the job market cooled since 2015 when the Fed began tightening policy.
The rate increase was in line with investors' expectations and showed policymakers' confidence in the economy's growth prospects, continued low unemployment and steady inflation.
At a news conference, Powell sought to portray the Fed's actions as evidence mainly that the economy is doing well and not that the central bank is eager to accelerate its rate increases. "Fiscal policy played a role during the crisis, but monetary policy was at the forefront".
"I think we are far enough away now though that the risks are kind of balanced", he said.
In a notable change to its statement, the Fed removed language indicating that it expected the economy to grow at a pace warranting "gradual" rate increases.
The economic expansion has survived for nine years and is now the second-longest in history.
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At least on the immediate horizon, little appears to stand in the way, given the government's $1.8 trillion in combined tax cuts and planned spending.
Most economists had not expected the Fed to give a clear sign that an additional rate increase was likely until later in the year. The median average of the central bank's updated forecasts - also referred to as the "dot plots" - called for interest rates to end the year around at 2.4%, up from March's projection of 2.1%; The forecasts suggest the Fed will raise interest rates two more times this year. Another reason for caution is the White House's threats of more tariffs, including on its closest allies, raising questions over how global trade will affect growth.
Estimates of longer-run interest rates were unchanged and seen reaching as high as 3.4% in 2020 before dropping to 2.9% in the longer run.
The central bank's new median forecast projects the Fed's benchmark rate at 3.1 percent by the end of 2019, up from 2.9 percent in the previous forecast.
The Fed now envisions stronger growth this year - 2.8 percent, up from the 2.7 percent it predicted in March.
USA 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.
Fast-forward to April of this year when data showed that US job openings jumped to a record high, far outpacing hiring.
"The labor market is getting tighter, and price pressures are picking up", said Greg McBride, chief financial analyst at Bankrate.com. "The labour market is on fire".