The Fed's "not stepping on the brakes, it's letting off the accelerator a little bit," says Quicken Loans chief economist Bob Walters, noting that mortgage and other long-term rates have remained extremely low even though the Fed has been raising rates since June.

Banks responded by increasing their prime rates — the rates to which most consumer lending, aside from mortgages, is tied — to 5.25 percent.

Hawai'i's three largest financial institutions announced that they would be raising their prime rates as well. First Hawaiian Bank increased its prime lending rate — the rate given to its most credit-worthy customers — to 5.25 percent from 5 percent, effective yesterday. Bank of Hawaii and American Savings Bank followed suit, also to 5.25 percent at each institution, but the rates are effective today.

Investors showed little reaction to the widely expected decision. The Dow Jones industrial average rose 38.13 points to 10,676.45.

In their post-meeting statement, Fed policymakers said the economy was growing at a "moderate pace," despite the rise in energy prices this year. Job-market conditions "continue to improve gradually," the Fed said, a slight moderation from its statement after the November meeting, which did not include the word "gradually" in its assessment of the job market.

Inflation and inflation expectations, meanwhile, "remain well contained," the Fed said, repeating that it can continue to raise interest rates at a "measured" pace.

The Fed has been slowly raising rates to remove the large amount of stimulus it added when the economy slid into recession in 2001 and after the Sept. 11 attacks. The rate increases are not out of concern about any immediate inflation threat.

William Dunkelberg, chief economist for the National Federation of Independent Business, says he expects the Fed will add at least another percentage point to its target for short-term interest rates to take policy "off the stimulus track."

But rates are rising slowly enough that consumers and businesses will continue to be able to lock in low interest rates.

"This is a very good environment," J.P. Morgan Fleming Asset Management senior economist Anthony Chan says. "It certainly shouldn't stir up any panic on the side of the consumers."

The Fed's next policy meeting will be in early February.

Investors who bet in a market on future Fed moves expect the Fed to raise rates by another quarter-percentage point in February, according to economic consulting firm Economy.com.