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The Federal Open Market Committee on Wednesday said it is leaving the federal funds target rate unchanged at a range of 0.25 to 0.5 percent but that "the case for an increase in the federal funds rate has strengthened."

The FOMC released its policy statement at the close of its two-day meeting.

"As expected, the Fed held off on a rate hike this month," said NAFCU Chief Economist and Director of Research Curt Long. "But with the improvement we have seen in the labor market, Fed officials will not want to wait too much longer and risk courting inflation. Barring a major setback, a fourth-quarter rate hike looks likely."

Three FOMC voters dissented, saying they wanted to raise rates this month; three is the highest number to dissent since December 2014. The median federal funds target rate projection indicates one quarter-point hike in 2016 – down from a June projection of two – and two rate hikes in 2017 – down from a previously projected three.

Earlier this month, Federal Reserve Board Gov. Lael Brainard made an argument for caution in raising interest rates and expressed support for "a more gradual normalization path."

The FOMC's next two-day policy meeting is set for Nov. 1-2.

The FOMC raised the federal funds target rate to a range of 0.25 to 0.5 percent in December 2015.