U.S. indexes lifted following the announcement, with the Dow Jones rising as much as one per cent. Eastern time Wednesday, the Fed will issue a policy statement and update its economic projections before Powell begins taking questions from reporters.
Fed officials indicated they are likely to raise rates a total of three times in 2018, in keeping with their projections in December.
The Central bank hiked short-term interest rates by a quarter-point and predicts that rates will rise higher than previously expected in the coming years.
Before the meeting, analysts were split over whether the Fed, which is wary of an early misstep under its new leadership, would raise policy tightening expectations until more price pressures are clearly evident. Officials raised their median estimates for economic growth this year to 2.7 percent, up from 2.5 percent in December.
Powell's job is to keep the economy churning without starting a recession during his four-year term - a risk the Fed chair has said he does not see as imminent.
But there's also a silver lining for savers: Because interest rates have been low for years, it's been tough to gain much extra ground in the form of interest when stashing away cash in savings accounts. The Fed also signaled that there are two more rate hikes on the horizon in 2018, and raised speculation that they may even consider a third. The unemployment rate remained at a 17-year low of 4.1 per cent. The Fed expects inflation, which has run below its 2 percent target for six years, to stay at 1.9 percent this year and then rise to 2 percent in 2019.
And while it may sound like a misbegotten goal, there's a good reason the Fed sometimes aims to curb spending and slow the economy; otherwise, an overheating economy can trigger rising - even spiraling - inflation. It's the fourth boost to the benchmark overnight rate in the last 12 months, and the first rate hike by the Fed under new Chairman Jay Powell.
Speaking of prices, they're crawling back up after a weak performance through the middle of 2017, but both the core Consumer Price Index and the Fed's preferred gauge based on consumer spending habits remain below the central bank's 2 percent goal. The Dow Jones Industrial Average closed down 45 points; it had been up 210 just before the announcement.
A rise in oil prices to a six-week high and signs that US inflation remains in check helped reverse a day-long decline in world equity markets Wednesday.
The outcome of the Fed meeting is due at 18.00 GMT (14.00 Eastern Time), so expect some volatility in the Dollar exchange rate complex.
Federal Reserve Chairman Jerome Powell arrives or a news conference following the Federal Open Market Committee meeting in Washington, Wednesday, March 21, 2018. "That's why we are seeing a bit of a disappointment on the dollar side", said Minh Trang, senior foreign currency trader at Silicon Valley Bank in Santa Clara, California.