However, the Fed now believes inflation will fall well short of its target this year. The statement noted that inflation in the next 12 months “is expected to remain somewhat below 2 percent in the near term” but to stabilize.

“This is a statement that was largely in line with expectations and didn’t ruffle many feathers,” said Art Hogan, chief market strategist at Wunderlich Securities. “They raised concerns about inflation — that’s dovish — but the dot plots didn’t change, score one for hawks.”

The Fed’s preferred inflation measure, the PCE deflator, came in at a weaker 1.5 percent, well below the Fed’s 2 percent inflation target.

“We’ve got this deflationary backdrop and because the Fed is paying so much attention to the Phillips curve, they may not be paying so much attention to other factors in the economy,” said Gary Cloud, fixed income portfolio manager of the Hennessy Equity and Income Fund.

The latest consumer price index reading, released Wednesday, fell 0.1 percent. Economists expected CPI to rise 0.2 percent.

Kathy Jones, chief fixed income strategist at Charles Schwab, said: “On the surface, you look at it and say: ‘Why are you raising rates?'”

U.S. Treasurys held higher after the Fed’s announcement, with the benchmark 10-year yield sliding to 2.145 percent; it traded near 2.2 percent earlier in the session.

“The [bond] market reaction was as expected, but for the wrong reason,” said Richard Piccirillo, managing director at PGIM Fixed Income. “We got a bit more hawkishness in the statement but the market didn’t react.”