The US economy continues to strengthen, the Fed indicated, and it no longer needs the historically low interest rates that were put in place in the aftermath of the financial crisis to stimulate growth.
The Fed now foresees four rate hikes this year, up from the three it had previously forecast.
"I think we are far enough away now though that the risks are kind of balanced", he said.
Fed vote in favor of policy was unanimous.
The so-called " dot plot" released Wednesday showed eight Fed policy makers expected four or more quarter-point rate increases for the full year, compared with seven officials during the previous forecast round in March.
The FOMC stayed on its very gradual pace of raising its target fed funds rate a quarter-point at a time-to a range. The move reflects the economy's resilience, the job market's strength and inflation that's finally nearing the Fed's target level.
Federal Reserve Chairman Jerome Powell may have uttered the most unlikely words in the history of central banking Wednesday when he responded to a question at a press conference by saying "our mandate has nothing to do with marijuana". While Japan's central bank isn't expected to make any major policy shifts, anticipation is rising that the ECB may outline as early as this week plans to begin paring its bond-buying stimulus program as a prelude to ending them altogether.
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. Powell said incentives in the Republican tax cut legislation could boost investment and lead to higher productivity although the timing was uncertain. In fact, the Fed didn't change its median longer-run growth estimate of 1.8 percent. "He is someone who thinks the US economy has a lot of room at the margin". The Committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labour market conditions, and inflation near the Committee's symmetric 2 per cent objective over the medium term.
This hike, which was widely expected, is the Fed's second of 2018, and the central bank signalled it is likely to do two more increases by the end of this year.
Policy makers kept their hiking path at three hikes for 2019 while trimming the 2020 outlook to one increase. The media forecasts expect the unemployment rate to drop to 3.6% this year, down from March's projection of 3.8%.
The Fed's pace of rate hikes for the rest of the year could end up reflecting a tug of war between a sturdy economy and the risks to growth, including from a potential trade war that could break out between the United States and such key trading partners as China, the European Union, Canada and Mexico.
"'You have fiscal policy pushing on the gas, and downside risks from trade disputes so they are continuing their gradual approach", said Julia Coronado, president of Macropolicy Perspectives LLC in NY.
In a technical move, the central bank also made a decision to set the interest rate it pays banks on excess reserves - its chief tool for moderating short-term interest rates - at just below the upper level of its target range.