Federal Reserve officials, amid signs that the U.S. economy soon could shed its long period of stagnation, approved the first interest rate hike in a year Wednesday and said it foresees three more increases next year.

The stock market reacted calmly, while bond yields and the dollar rose. The yield on 2-year Treasurys hit its highest level in since August 2009.

The Federal Open Market Committee raised its target range from a range of 0.25 percent to 0.5 percent to 0.5 percent to 0.75 percent. The overnight funds rate currently sits at 0.41 percent.



The committee also approved a quarter-point increase in the discount, or primary credit, rate, from 1 percent to 1.25 percent.

The decision was unanimous. Previous meetings had featured dissents from as many as three members who felt the Fed should resume a rate-hiking cycle it began in December 2015.

In addition to approving the much-expected increase, the FOMC also indicated a higher rate than projected back in September when it last released the quarterly look ahead. The committee now expects three rate hikes in 2017, two or three in 2018 and three in 2019.

In effect, the Fed added one more hike during the entire period, with the longer-run target up to 3 percent from 2.9 percent.

"What they did was highly anticipated. There was a slight surprise in next year, looking at an additional rate hike," said Myles Clouston, senior director of Nasdaq Advisory Services. "Overall, the Fed remains pretty steady overall, looking at gradual raises in interest runs in the long run."



The closely watched dot-plot also indicated a somewhat more ambitious future for hikes.

However, the committee continued to emphasize in its post-meeting statements that the path higher will be "gradual." It also stuck with language indicating that risks to the Fed's forecasts remain "roughly balanced," and emphasized that future moves will be data-dependent rather than subject to a set schedule.