WASHINGTON (AFP) - Federal Reserve policymakers, offering an upbeat outlook, lifted the federal funds rate a quarter-point to 1.75 percent, saying the US economy no longer needs as much stimulus.
The Federal Open Market Committee also said in a statement that it sees the risks to the US economy as balanced, allowing a more neutral monetary policy.
The rate hike vote was unanimous and marked the third increase in as many meetings of the FOMC since June. The action had been widely expected by financial markets.
"It was expected, but I view this as a vote of confidence for the economy," said Sung Won Sohn, chief economist at Wells Fargo Bank.
"The economy is still in somewhat of a soft patch, but the Fed is putting its weight on economic growth, they are not predicting or foreseeing an economic slowdown."
"The Fed is comfortable that the economy is doing well enough to cope with moderately higher interest rates, but doesn't have to make the decision about just how strong the economy really is," said Avery Shenfeld, economist at CIBC World Markets.
Shenfeld said he sees the statement as a signal that the central bank will continue its pattern of quarter-point hikes, at least next month.
"If the Fed was ready to raise rates with soft growth, I don't think they will be deterred in November," he said.
Others said the Fed may be forced to reassess its plan in the near future.
"All of this is consistent with the notion that the FOMC continues to believe that it will be able to tighten at a 'measured' pace," said Josh Shapiro, chief US economist at MFR Inc.
"However, this will be dependent on evidence that the economy continues to grow at an adequate rate, and that there are no significant surprises (either to the upside or the downside) on the core inflation front."
Fed chairman Alan Greenspan and his colleagues said that even with these three hikes, rates remain low and this stimulus should be removed "at a pace that is likely to be measured."
The FOMC statement, similar to its comments in August, suggests that it sees stabilizing US economic conditions that can support higher interest rates.
"After moderating earlier this year, partly in response to the substantial rise in energy prices, output growth appears to have regained some traction, and labor market conditions have improved modestly," the statement said.
The FOMC statement added that inflation remains tame, despite a recent surge in oil prices.
"Despite the rise in energy prices, inflation and inflation expectations have eased in recent months," the statement said.