The Fed released its interest rate decision on Wednesday. It raised its interest rate to the range 0.25% - 0.50% from 0.00% - 0.25% as widely expected by analysts. All Federal Open Market Committee (FOMC) members voted for the interest rate hike, despite the observed differences earlier.

The Fed repeated that further interest rate hikes will be gradual.

"The actual path of the federal funds rate will depend on the economic outlook as informed by incoming data," the Fed said in its statement.

Interest rate forecasts were downgraded. The Fed expects its fed-funds rate to be 1.375% by the end of 2016, 2.375% by the end of 2017, down from its previous estimate of 2.625%, and 3.25% by the end of 2018, down from its previous estimate of 3.375%.

The Fed noted that risks to the outlook for both economic activity and the labour market are balanced, adding that low inflation was driven by declines in energy and import prices which are temporary.

The Fed Chairwoman Janet Yellen said in a press conference on Wednesday that the Fed is confident regarding the strength of the U.S. economy.

"The Fed's decision today reflects our confidence in the U.S. economy. We believe we have seen substantial improvement in labour market conditions and while things may be uneven across regions of the country, and different industrial sectors, we see an economy that is on a path of sustainable improvement," she said.