"Information received since the Federal Open Market Committee met in July indicates that the labor market has continued to strengthen and that economic activity has been rising moderately so far this year".
Fed Chair Janet Yellen said the fall in inflation this year remained a mystery, adding that the central bank was ready to change the interest rate outlook if needed.
The dollar built on gains against the yen Thursday after the Federal Reserve unveiled plans to wind down its crisis-era stimulus and hinted at another interest rate hike before the end of the year.
Stocks are narrowly higher in early trading on Wall Street as investors wait to hear from the Federal Reserve.
Market odds for at least one rate increase by December were approaching 60 percent by Tuesday afternoon. Many have been skeptical the Fed will raise rates again, citing subdued inflation readings and concerns around the economic toll of major summer storms. The central bank will begin in October to wind down its over $4 trillion portfolio of mortgage bonds and United States federal government debt that it accumulated in a series of purchases since late 2008. The balance-sheet expansion was result of the Fed's so-called quantitative-easing programs - buying up financial assets to keep money flowing through the economy.
EUR/USD fell strongly down nearly 1%, below 1.19, while the GBP gave up most of its gains to dip just underneath 1.35.
The lesson, investors say, is that what really matters to the bond market isn't so much what the Fed is doing, but what the policy changes mean for the US economy in the months and years ahead.
"Today's movement is most likely a give back as people digest the Fed statement and press conference", said Michael Dowdall, investment strategist at BMO Global Asset Management.
Mark Zandi, chief economist at Moody's Analytics, told AFP the Fed should raise rates, because inflation is inevitable given steady growth and falling unemployment.
Fed officials predicted that inflation would rebound modestly next year, approaching the Fed's target of a 2 per cent annual pace.
Fed members also said that they now project faster growth for 2017, with a median forecast of 2.4 percent gross domestic product growth, versus a June projection of 2.2 percent. Inflation is expected to remain at or below 2 percent through 2019. The resolution of the stand-off over the U.S. debt ceiling in Congress has removed the final obstacle to the decision, which the Fed said would proceed at a fixed monthly level that can be adjusted as needed to be either faster or slower.