"The Federal Open Markets Committee said in a statement that the move was justified by encouraging economic indicators including strong job gains and low unemployment".
In its first policy meeting under new Fed chief Jerome Powell, the US central bank said inflation should move higher amid a stronger economy after years below its 2 percent target. In addition, the already historically low unemployment is seen falling even further, ending next year at a stunning 3.6 percent, according to the quarterly Summary of Economic Projections.
A 10-year rate at 2.91 percent is "seriously mispriced given the Fed's dot plot forecast", Brusuelas said. The unemployment rate remained at a 17-year low of 4.1 per cent. Global bonds and stock markets will follow the US markets in the rally. That day, February 5, the Dow Jones industrial average had its biggest-ever point drop after an unexpected jump in wages signaled that inflation was surging.
The Fed has raised the benchmark federal funds rate five times in quarter-point steps since December 2015.
In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation.
The Federal Reserve on Wednesday raised the key lending rate for the first time this year, citing a stronger outlook for economic growth, and hinted at a slightly more aggressive pace for hikes in 2019. The Fed's preferred inflation measure is forecast to end this year at 1.9 percent and barely move to 2.0 percent in 2019.
It's also the first Fed meeting since Jerome Powell took over as chairman, although so far Powell hasn't made any major breaks with the policies of predecessor Janet Yellen.
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The meeting was the first led by Jerome Powell, and with a more hawkish voting slate, the attention was more on the SEP than the expected rate hike.
For years after the financial crisis, the Fed raised rates slowly to keep the economy humming.
The Fed's statement did not mention the extra government stimulus that has been added since its most recent economic forecast in the form of a $1.5 trillion tax cut and a budget agreement that will add $300 billion in government spending over two years.
Fed Governor Lael Brainard, who has advocated slower rate hikes, has more recently expressed optimism about the trajectory of the economy.
Diane Swonk, chief economist at Grant Thornton, said she expects Powell to be "optimistic in his tone regarding the outlook for the overall economy".
The question is what his plans will be for the central bank later this year, as the Fed wrestles with how to prevent the economy from overheating.
Mr Powell said the Fed is "alert" to the possibility of inflation and expects inflation to rise in coming months, but is not expecting a sharp increase.