Investing.com – The Federal Reserve increased its key interest rate by 0.25% to a 1.00%-1.25% range on Wednesday, maintaining its view that three total rate hikes in 2017 will be appropriate.
Although the rate hike was widely expected, market participants had feared that a recent slowdown in economic activity would dampened expectations of a total three rate hikes in 2017. But the central bank remained adamant that economic growth is raising moderately while inflation will start to rise to the bank's 2% target over the medium term.
The Federal Reserve struck a familiar tone in its statement concerning interest rates, pointing out that gradual increases in interest rates remain appropriate. The central bank maintained its outlook of three rate hikes total for this year, as it expects that a tightening labour market will lift inflation to the 2% target over the medium term.
The Fed confirmed that it will proceed to trim its $4.5 trillion balance sheet this year.
"The committee currently expects to begin implementing a balance sheet normalization program this year, provided that the economy evolves broadly as anticipated," the Fed said in its statement.
According to information released Wednesday, the initial cap for Treasuries would be set at $6 billion per month initially and increase by $6 billion increments every three months over a 12-month period until it reached $30 billion per month in reductions to its holdings.
For agency debt and mortgage-backed securities, the cap will be $4 billion per month initially, increasing by $4 billion at quarterly intervals over a year until it reached $20 billion per month.
Following the release of the Federal Reserve's decision to increase its benchmark rate , the dollar initially jumped before paring gains, while gold prices slipped to session lows.
The US dollar index traded at 96.51, down 0.46%.
Gold Futures pared gains to trade at $1,269.44, up 0.06%.