• The Federal Reserve has raised its benchmark interest rate a quarter-point but lowered its projections for future hikes.
• The central bank took the target range for its benchmark funds rate to 2.25 percent to 2.5 percent.
• The move marked the fourth increase this year and the ninth since it began normalizing rates in December 2015.
• Some further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective over the medium term.

Federal Reserve

• In US, Federal Reserve is in charge of monetary policy i.e. used to control inflation or infuse growth in the economy.
• This reserve was established in 1913 by the Federal Reserve Act.
• Federal Reserve system consist of 12 major private institutions which are accountable to the US congress through Federal Reserve Board of Governors.

The Federal Reserve has three main mechanisms for manipulating the money supply:

1. It can buy or sell treasury securities. Selling securities means less money supply in the market and vice versa.
2. It can change of discount rate. By lowering the discount rate, bank can avail loan at less rate of interest, which can increase the money flow. This move will help if economy needs to grow faster and create more jobs. In order to control inflation, discount rates are supposed to be increased.
3. The Federal Reserve can adjust the reserve requirement, which can affect the money multiplier. Any increase or decrease will affect money supply in the market.

Practically, The Federal Reserve uses open market operations to influence the supply of money in the U.S. economy. This is done through federal fund rates. Federal fund rate is defined as interest rate at which banks and other depository institutions lend money to each other, usually on an overnight basis. The law requires banks to keep a certain percentage of their customer's money on reserve, where the banks earn no interest on it. Consequently, banks try to stay as close to the reserve limit as possible without going under it, lending money back and forth to maintain the proper level. Any increase in these rates leads to less money with the banks, because they now have to maintain more money in the reserve, and any decrease in these rates leads to more money supply with the banks.