The US Federal Reserve on Wednesday raised short-term interest rates by a quarter of a percentage point, but signaled a slower pace of rate hikes next year as the US economy is expected to cool down.

"In view of realized and expected labor market conditions and inflation, the (Federal Open Market) Committee decided to raise the target range for the federal funds rate to 2-1/4 to 2-1/2 percent," the Fed said in a statement after concluding a two-day policy meeting.

It marked the Fed's fourth rate hike this year and the ninth such move since late 2015, as the central bank moves forward on the path of monetary policy normalization.

The Fed said the US labor market has "continued to strengthen" and economic activity has been "rising at a strong rate" since the last policy meeting in November, while growth of business fixed investment has "moderated" from its rapid pace earlier in the year.

Fed officials expected the US economy to grow at 3 percent this year, a little bit lower than 3.1 percent estimated in September, according to the Fed's latest economic projections released on Wednesday.

Fed officials also revised down their forecast for US economic growth in 2019 to 2.3 percent from 2.5 percent previously estimated.

With an expected slowdown in the US economy, Fed officials envisioned two rate hikes next year, down from three estimated in September, according to the median forecast for the federal funds rate.

"Despite this robust economic backdrop and our expectation for healthy growth, we have seen developments that may signal some softening, relative to what we were expecting a few months ago," Fed Chairman Jerome Powell said Wednesday at a press conference.

"It is more likely that the economy will grow in a way that will call for two interest rate increases over the course of next year," Powell said, adding the tepid inflation gives the Fed the ability to "be patient" in moving forward on rate hikes.

But Powell also emphasized that the Fed's policy decisions are "not on a preset course." "There's a fairly high degree of uncertainty about both the path and the destination of any further increases," he said.

The Fed's meeting came after US President Donald Trump urged the central bank to refrain from further hiking interest rates, citing recent market turmoil.

"Feel the market, don't just go by meaningless numbers," Trump tweeted on early Tuesday.

When asked about how he perceived the market, Powell said that Fed officials would look for material changes in financial conditions as market volatility doesn't necessarily result in major economic impact.

"We follow markets really carefully but remember, from a macroeconomic standpoint, no one market is the single dominant indicator," he said.