"With underlying inflation expected to be relatively low, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured," said the Federal Open Market Committee (FOMC), the Fed's arm in charge of monetary policies, in a statement following a regular meeting.

At the meeting, the Committee decided to raise the federal funds rate, the interest commercial banks charge each other on overnight loans, by a quarter percentage point to 2 percent from 1.75 percent.

"The Committee believes that, even after this action, the stance of monetary policy remains accommodative and, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity," the statement said.

It added that "output appears to be growing at a moderate pace despite the rise in energy prices, and labor market conditions have improved. Inflation and longer-term inflation expectations remain well contained."

The Committee perceives the upside and downside risks to the attainment of both sustainable growth and price stability for the next few quarters to be roughly equal, according to the statement.

But the Committee will respond to changes in economic prospectsas needed to fulfill its obligation to maintain price stability.

In a related action, the statement said that the discount rate has been raised a quarter percentage point to 3 percent.