– This is the script of CNBC's news report for China's CCTV on June 13, Thursday.
Welcome to CNBC Business Daily, I'm Qian Chen.
The 25-basis-point rate hike was well expected by the markets, but what surprised them was the Fed's relatively hawkish outlook.
To be sure, most Fed policymakers still expect another rate hike in 2017, and three more next year. And the central bank also said it will start to normalize its massive $4.5 trillion balance sheet by year-end, with the details suggesting a slightly faster run-off that some had expected.
The Fed detailed how it plans to reduce its balance sheet gradually. It'll let some expiring assets roll off the balance sheet, starting with $6 billion from Treasuries and $4 billion from mortgage-backed securities .The caps will rise every three months until Treasuries reach $30 billion and MBS reach $20 billion, respectively.
Economists characterized the telegraphed balance-sheet reductions as "fairly aggressive" compared to expectations.
Officials didn't reveal the exact timing of when the process will begin this year, as well as specifically how large the portfolio might be when finished.
Meanwhile, the Fed updated its forecast on the U.S. economy and inflation outlook.
The Fed acknowledged low levels of inflation in the near term but expects inflation to stabilize in the medium term.
Officials raised the US 2017 GDP to 2.2 percent from 2.1 percent, and lowered the unemployment rate forecast to 4.3% from 4.5%.
Meanwhile, the Fed also stuck to its forecast for three interest rate hikes this year.
Take a look at the latest Fed's dot plot chart.
The new dot plot is broadly similar to that of March, with the median FOMC member expecting rates between 1.25 and 1.5% at the end of 2017, suggesting one further rate hike this year, before gradually moving to around 3% in the longer term.
[ROBERT HELLER, Former Federal Reserve Governor] "I think the Fed will do one hike, and that's just because they want to go slow and try to avoid anything that might upset the markets, not that I think the markets wouldn't be able to take a stronger increase and faster pace of normalization. That's what we are talking about."
On the market front, treasury yields, which move opposite prices, had fallen sharply in the morning after a slew of economic data came in weaker than forecast. Gold prices went up initally and dollar went weaker. However, after the Fed's news conference, gold was sold off on the hawishness of the Fed and once fell through the key level of 1260 dollar per ounce before bouncing back a bit. Meanwhile, U.S. treasury yields and the dollar pared earlier deep losses but still closed lower.
CNBC's Qian Chen, reporting from Singapore.