In raising its benchmark overnight lending rate a quarter of a percentage point to a range of between 1.75 percent and 2 percent, the Fed dropped its pledge to keep rates low enough to stimulate the economy "for some time" and signaled it would tolerate above-target inflation at least through 2020.
The widely-anticipated decision will lift the target for the central bank's benchmark rate to 1.75%-2%, the highest level since 2008.
Fed officials also said they expect to raise rates twice more this year, faster than previously forecast.
Negative for gold though is that the central bank also forecasts tame inflation pressures throughout year.
It was the Fed's seventh rate increase since it began tightening credit in 2015, and it followed an increase in March this year. Ahead of the announcement, markets were pricing in a almost 100% chance of a rate hike.
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Chairman Jerome Powell is scheduled to hold a press conference at 2:30 p.m., his second since taking the helm from Janet Yellen in February.
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. However, the focus will be on the updated economic projections and the dot diagram, which will reveal the expectations of the number of rate hikes in the remainder of the year.
Officials lowered their jobless-rate estimates after unemployment fell to 3.8 percent as of May, matching April 2000 as the lowest reading since 1969. The projections show inflation rising 2.1% for the next three years. The Fed is looking for interest rates to rise to 3.4% by 2020, unchanged from the previous forecast. USA 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.
FILE PHOTO: Federal Reserve Chairman Jerome Powell speaks at a news conference following the Federal Open Market Committee meetings in Washington, U.S., March 21, 2018. Inflation expectations are slightly higher this year compared to March's forecast of 1.9%. Economic activity is projected to expand 2.4% in 2019, unchanged from the previous forecast; finally, the economy is expected to grow 2.0% in 2020, unchanged from the previous forecast.