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The Federal Open Market Committee (FOMC), at the close of its two-day policy-setting meeting Wednesday, said it will raise the federal funds target rate by a quarter-point to a range of 1.25 to 1.5 percent.

The committee stressed that it "expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate."

"The FOMC's actions [Wednesday] were widely expected," said NAFCU Chief Economist and Vice President of Research Curt Long. "The committee struck a mostly positive note in its statement and appears poised for further rate hikes in the first half of 2018."

The committee's revised projections are three quarter-point rate hikes in 2018 and two to three in 2019. Long, in a NAFCU Macro Data Flash report, said these projections show improved expectations for economic growth and the unemployment rate next year.

Long added that Fed Chair Janet Yellen, in her final post-FOMC meeting press conference, identified tax reform as the main reason for the improved outlook. "Meanwhile, the committee revised its statement that labor market conditions are expected to 'remain strong' instead of 'strengthen somewhat further,' " he said. "This change might suggest that the labor market has achieved full employment, and that further improvements may be unsustainable."

While overall inflation and core inflation "have declined this year and are running below 2 percent," the committee expects inflation to stabilize around 2 percent over the medium term. The committee noted that it is "monitoring inflation developments closely."

The Fed will continue to reduce its securities holdings by decreasing its reinvestment of the principal payments from its holdings of Treasury securities and agency mortgage-backed securities. In accordance with the Addendum released in June, December's reinvestment will be trimmed by $10 billion. Effective in January, the amount of balance sheet reduction will increase to $20 billion per month.

The FOMC will meet again Jan. 30-31.