WASHINGTON (MarketWatch) — The Federal Reserve raised interest rates for the first time since 2006, ending what Chairwoman Janet Yellen called an “extraordinary period” in which the bank sought to revive the economy in the aftermath of the Great Recession.

Policy makers on Wednesday voted 10 to 0 to lift the Fed’s short-term borrowing rate by a quarter-point to a range of 0.25% to 0.5%. The Fed’s short-term rate had kept near zero for seven years, marking an unprecedented era in the history of U.S. monetary policy triggered by the worst financial crisis and economic downturn since the 1930s.

Fed officials said an improved economy was ready for a rate hike, pointing to “solid” consumer spending, a rebounding housing market and stronger business fixed investment. The central bank also took careful note of a healthier labor market in which the unemployment rate has tumbled to 5% — just half as much compared to the early stages of a recovery that began in mid-2009.

“The first thing that Americans should realize is that the Fed’s decision today reflects our confidence in the U.S. economy,” Yellen said in a press conference after the Fed action.

Read more:Follow live blog of Fed decision

Yet the Fed used new language in its statement to soften the blow to the end of easy money, stressing repeatedly that the pace of interest-rate hikes would be “gradual.” Interest rates are expected to rise a bit slower, for example, in 2017 and 2018 than the Fed previously predicted.

U.S. stocks closed with strong gains. Treasury prices fell and the yields rose.

The Fed action “was done in as non-threatening way as possible,” said Carl Tannenbaum, chief economist at Northern Trust.

Yellen’s message centered on the traditional view that Fed policy most be proactive.

A dovish view?

To bring on board the doves in the Fed who were hesitant to raise rates, the majority led by Yellen appeared to put special emphasis on the surprisingly low rate of inflation.

”We really need to monitor over time actual inflation performance to make sure that it is conforming, it is evolving, in the manner that we expect,” Yellen said. In other words, it will take more than just “confidence” that inflation will rise for the Fed to act.

During her press conference, Yellen refused to be more specific about what “actual” inflation performance meant.

She said if inflation diverged from expectations, the Fed would respond.

The U.S. central bank still expects inflation to pick up sharply next year to a 1.6% annual rate from 0.4% rate this year.

Not all the signals the Fed sent were dovish.

The central bank didn't change its so-called dot plot for 2016 that projects one rate hike each quarter. According to this forecast, the target fed-funds rate would reach a 1.4% rate at the end of 2016.

The Fed also dismissed worries that weak oil and commodity prices were poised to push the economy into a downturn.

“Overall, taking into account domestic and international developments, the FOMC sees the risks to the outlook for both economic activity and the labor market as balanced,” the statement said.

Yellen said that consumer spending, housing activity and business investment could surprise to the upside and said there were pockets of improving conditions in the global economy.

Still, the Fed made it clear that interest rates aren’t going up quickly.

The median path for the “dot plot” declined by 20 basis points in 2017 to 2.4%, and 10 basis points in 2018 to 3.3%, suggesting one fewer cut over the two years than the FOMC had projected in September.

For now the central bank plans to maintain its huge reserve of Treasurys and mortgage-backed securities that it acquired through a controversial policy known as quantitative easing. The Fed boosted its balance sheet to a stunning $4.5 trillion in its strategy to lower the borrowing costs of consumers and businesses, thereby aiding an ailing economy.

All sorts of business and consumer debt, ranging from auto loans and mortgages to corporate lines of credit, are tied to the Fed’s benchmark rate. They tend to move up and down in tandem with the fed funds rate, giving the economy a boost or preventing it from overheating.

While the economy has still not returned to historic growth levels, the U.S. is performing much better than most other countries that adopted less aggressive approaches. What remains to be seen is whether the Fed can reduce its huge mound of reserves without damaging the economy in unexpected ways.