The US Federal Reserve has raised interest rates by 0.25% bringing its main refinancing rate to range of 1.5 to 1.75%.
The American Central Bank forecast at least two more hikes for 2018, signalling growing confidence, US tax cuts and government spending will boost the economy and inflation and lead to more aggressive future tightening.
In its first policy meeting under new Fed chief Jerome Powell, the bank indicated that inflation should finally move higher after years below its 2% target and that the economy had recently gained momentum.
The Fed also raised the estimated longer-term "neutral" rate, the level at which monetary policy neither boosts nor slows the economy, in a sign the current gradual rate hike cycle could go on longer than previously thought.
"The economic outlook has strengthened in recent months," the Fed said in a statement at the end of a two-day meeting.
Inflation "is expected to move up in coming months and stabilize" around the Fed's target, it said.
The rate hike was widely expected.
The move was the latest step away from years of stimulating the world's largest economy in the wake of the 2007-2009 financial crisis and recession. The Fed tightened policy three times last year.
Policymakers were largely split as to whether a total of three or four rate hikes would be needed this year.
They predicted rates would rise three times next year and two times in 2020, a further indication of confidence in the economy.
They projected US economic growth of 2.7% in 2018, an increase from the 2.5% forecast in December, and also marked up growth for next year.
The Fed's preferred measure of inflation was expected to end 2018 at 1.9%, unchanged from the previous forecast, but it is seen rising a bit above the Fed's target next year.
The US unemployment rate by the end of 2018 is expected to edge down to 3.8%, indicating the Fed sees more room for the labour market to run.
US joblessness stood at 4.1% last month.
