The Federal Reserve hiked America's benchmark interest rate a quarter point on Wednesday to 1.75 to 2 per cent, a move that will likely cause a slight increase in mortgage, credit card, auto and small business loan rates.
Wednesday's action, which was widely expected, was the second Fed rate hike this year - and the seventh since it began boosting them in 2015.
"The main takeaway is that the economy is doing very well", Fed Chairman Jerome Powell said at a news conference. The federal funds target rate, which is now between 1.75 and 2 percent, is the highest it's been in almost a decade, indicating that the nation's central bank has confidence the economy will continue to expand.
So-called core inflation - which excludes volatile items like energy and housing - is now 2.2 percent, around the level the Fed is looking for.
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. For 2020, the Fed foresees a median rate of 3.4 percent.
The Fed's latest projections show unemployment falling to 3.6 percent in 2018. He'll likely address the decision to hike rates and the Fed's views on the overall economic outlook.
However quarterly economic forecasts show central bankers now expect the rate to end the year at 2.4%, rather than the 2.1% projected in March. Inflation by the Fed's preferred gauge would hit its target of 2 percent this year and edge up to 2.1 percent over the next two years.
With employers hiring at a solid pace month after month, unemployment has reached 3.8 percent.
Beginning in 2008 in the midst of the financial crisis, the Fed kept its key rate unchanged at a record low near zero for seven years.
The Fed aims to achieve its mandates of maximizing employment and stabilizing prices by lowering rates to spur growth during times of economic weakness and raising rates to slow growth if the economy threatens to overheat.
The higher rates should be a boon for savers, while increasing borrowing costs for households and businesses throughout the economy.
Fed officials and many economists worry that the low jobless rate could force employers to hike wages faster, as companies compete for workers.