The Federal Reserve raised the fed funds rate by 25 basis points to a range of 5%-5.25% Wednesday, as expected by the market, delivering the tenth hike in the tightening cycle and bringing the cost of borrowing to the highest since September 2007.

The U.S. banking system is sound and resilient, the Federal Open Market Committee said in a statement. Stricter credit conditions for households and businesses will likely have a negative impact on economic activity, employment and inflation, the FOMC said.

The phrase "in determining the extent of future increases in the target range" was deleted from the FOMC's May policy statement and replaced with "in determining the extent to which additional policy firming may be appropriate".