* Policy maker projections point to three rate hikes in 2018, unchanged from September projections
* FOMC members see faster growth trajectory, faster decline in unemployment rate than in September
* FOMC members' inflation projections unchanged for 2018 and beyond
* FOMC statement holds to view that inflation will reach 2 percent policy goal over medium term
* Vote on rate increase was 7-2, with Chicago's Charles Evans and Minneapolis' Neel Kashkari dissenting in favour of no increase
JONATHAN LEWIS, CHIEF INVESTMENT OFFICER, FIERA CAPITAL, NEW YORK:
"The news is not the tightening. That was pretty well telegraphed. The news is a combination of the tightening and that it occurred on a day when the CPI numbers were lower than expected. TIPS are meaningfully underperforming. They're not going up as much as the regular Treasuries.
"The Fed statement said that while inflation is subdued, they remain confident that in the next 12 months that it will hit the 2 percent target. The TIPS market is saying the exact opposite."
QUINCY KROSBY, CHIEF MARKET STRATEGIST, PRUDENTIAL FINANCIAL, NEWARK, NEW JERSEY:
"The assessment (on the economy) was not surprising but that was a change in the statement. It almost doesn't matter. The composition (of the FOMC) will be different and the economic landscape will be different. Markets see this as another move toward normalization, not tightening. If anything it had a dovish tilt, there were no surprises. Financial conditions have been very accommodative so it is hardly seen as tightening.
"They see the stubbornness of inflation to grind higher and perhaps accept it as a byproduct of an economy that has not reached its potential.
"(Janet Yellen) vigorously endorsed Jerome Powell as a successor, suggesting the Fed is in stable hands and in essence telegraphing to markets they should not expect a deviation from the path of monetary policy that she's established.
"The equities market is also reacting to the possibility that Congress may have a tax plan on the president's desk by the end of the year."
CHARLES RIPLEY, SENIOR INVESTMENT STRATEGIST, ALLIANZ INVESTMENT MANAGEMENT, MINNEAPOLIS:
"They upgraded the growth forecast for 2018. We think that's pretty in line with what we've seen with the economic backdrop over the past couple months. That definitely resonates well with our view.
"The interesting thing is the inflation topic. Obviously Janet Yellen continues to have this view that inflation is transitory. They haven't been able to meet the 2 percent target, and I think this might be one of the problems they face as we change hands into a Powell-led Fed going into next year.
"One of the things I took note today was the two dissenters that came out. That was (Chicago Federal Reserve Bank President Charles) Evans and (Minneapolis Federal Reserve Bank President Neel) Kashkari. I think it could be somewhat troublesome for Powell going into next year to get everybody in line to make good on his promise of continuity, which most markets view as the continuation of policy normalization.
"When you look at today's inflation numbers, it's not really supportive of that Fed view that inflation is going to continue moving higher. We think this is probably one of the bigger risks going into next year, especially with a Fed that has three rate hikes forecasted in the market."
JOSEPH LAVORGNA, CHIEF ECONOMIST, AMERICAS, NATIXIS, NEW YORK:
"The only surprises are that they squeezed a hike into 2020, I'm not sure why, yet they didn't change the long-term terminal rate, so it's terribly hawkish or bond bearish. The second thing is there were two dissents. I'm not totally surprised by (Neel) Kashkari, I thought he could dissent.(Charles) Evans a little bit more surprised on. Now why do two dissents matter? I guess I know they're not voting next year, but the Fed isn't going to have a lot of hawkish members next, and there are still a bunch of openings and my guess is perhaps have dovish leanings.
"The other thing I thought interesting the Fed did not change its estimate of the long-run (equilibrium unemployment rate), they kept it at 4.6 percent, not sure why. They still think longer-run growth is 1.8 percent, so they're very much in the secular stagnation camp."
JOHN STOLTZFUS, CHIEF INVESTMENT STRATEGIST, OPPENHEIMER ASSET MANAGEMENT, NEW YORK:
"I believed that Janet Yellen would raise rates one last time in her term. It's a sign of the Fed's determination to provide a message to the markets that the Fed is committed to normalization while Yellen and co are on guard. The Fed acted very responsibly, in line with expectations. You would have knocked me out of my chair if they hadn't raised rates.
"I believe they will raise rates at least twice in 2018. They may not resort to raising a third time on concern that it will add to the flattening of the yield curve. Instead of reducing their balance sheet, they may try to coax rates up in medium-term notes further."
JASON WARE, CHIEF INVESTMENT OFFICER, ALBION FINANCIAL GROUP OFFICE, SALT LAKE CITY:
"Nobody is surprised by the hike. There's not a whole lot of flattening or expansion in the yield curve. (The market is) taking it in its stride. There is nothing boosted in terms of sectors and financials are trailing. If there was anything ultra hawkish, financials would be responding up. Yellen has done such a good job of staying in front of markets and not creating much volatility."
MICHAEL ARONE, CHIEF INVESTMENT STRATEGIST, STATE STREET GLOBAL ADVISORS, BOSTON:
"What the Fed has done well this year, they've delivered on all their expectations. The Fed has done what they have said they were going to do, and today is just another example of that. I do think they indicated that they expect rates to rise a few times next year as well, they're on track to do that.
"The one thing I would say is the Fed is signalling it will raise rates three or maybe four times next year, while the market continues to only price in one to two rate hikes, and that discrepancy needs to be reconciled. So either the Fed needs to come around to the market, or the market needs to adjust itself to the Fed."
JOHN DOYLE, DIRECTOR OF MARKETS, TEMPUS INC, WASHINGTON:
"The dollar obviously reacted poorly, but I think that's a knee jerk reaction. I don't think that there's anything that's happened in the last 5 minutes that is necessarily dollar negative. They're still talking about a strong labour market, still seeing faster growth for 2018 and three rate hikes for next year. I think all of that is if anything dollar neutral if not dollar positive overall. I think this little pop (lower in the dollar) we've seen here will be short-lived.
"Some people might have gotten caught on the wrong side, people hitting stops and things like that. I do want to put it in perspective. We're talking about 20 basis points, so it is a small move so far but I think some people might just have been expecting something much more bullish, like four hikes on the dot plot or something like that. But overall in the more medium- and long-term, today's happenings are at least dollar neutral."
NEIL SUTHERLAND, PORTFOLIO MANAGER, SCHRODERS, NEW YORK:
"There were not too many surprises. The big one is the growth projection. That is a significant move given the growth data we have received. I think people have placed too much emphasis on the dots given the turnover at the Fed we will see in the next year. The dots may too be rendered useless. The market may a bit too complacent about the pace of rate hikes. It may rise faster than what the market is pricing in. At Yellen's press conference, she will likely look to cement her legacy. It may be more of a farewell press conference than where she will offer a lot of clues about policy."
MARK GRANT, MANAGING DIRECTOR AND FIXED-INCOME STRATEGIST, HILLTOP SECURITIES, FORT LAUDERDALE, FLORIDA:
"The two dissents were worth notice. There seems to be a growing push back against raising rates. I would imagine that the Treasury will visit with the Fed at some point because higher interest rates do not help to grow the economy. I expect that the new Chairman, Mr. Powell, will have a more benign view than Ms. Yellen. I think the Fed is jaw boning about higher rates but that will end next year. I do not expect to see and three or four rate rises in 2018, when all is said and done. What the Fed has erred on, and significantly, in my opinion has been inflation. The $21.7 trillion of manufactured 'Pixie Dust' money created by the central banks did not go into good and services but into the markets and so we have, 'higher equity prices, lower yields and a compression of risk assets to their benchmarks.' I think this will continue into the foreseeable future. Meaning until the global central banks stop printing."
MICHAEL O'ROURKE, CHIEF MARKET STRATEGIST, JONESTRADING, GREENWICH, CONNECTICUT:
"The announcement was basically in line with expectations. Obviously they updated their growth forecast for the economy, which is fair, considering the economic data has been coming in on the better side. It's a little surprising that they did not upgrade their inflation expectations... even a slight uptick in inflation expectations would have been expected there. Otherwise everything is in line with expectations.
The market is reacting as you would expect as far as equities. Bonds rallied a little bit. If anything, you'd think bonds would sell off with the upgraded growth forecast."
PETER TUZ, PRESIDENT, CHASE INVESTMENT COUNSEL, CHARLOTTESVILLE, VIRGINIA:
"It shouldn't change what people are anticipating about next year, three or four more rate hikes."
"The inflation part of the whole equation is just barely at the level that they like to see before raising rates, but I guess there's enough confidence in the economy to go ahead and do it and let's see what happens for the next three months."
"The economy seems to be expanding enough to warrant this but not at an incredibly robust rate to suggest that there will be a more rapid series of rate increases going forward. There's a continuation of a very measured approach that Janet Yellen instituted, and I imagine the new guy will continue the same trend as long as the data are similar going forward."
ERIK NELSON, CURRENCY STRATEGIST, WELLS FARGO, NEW YORK:
"The downward move in the dollar is interesting and notable in the sense that the only dovish thing I see in this meeting is the two dissents. Maybe only one was expected. For one thing, these two regional presidents are going to be rolling off the voting committee next year. If you look at the rest of the assessment from officials in terms of the statement and projections, they seem either unchanged or shifting to a slightly more hawkish direction. What that signals to me is that markets were maybe expecting something even more hawkish."
DENNIS DE JONG, MANAGING DIRECTOR, UFX.COM, LIMASSOL, CYPRUS:
"Although widely expected, some policymakers have expressed concerns at today's rate hike at a time when wage growth remains stagnant and inflation is only crawling northwards. Following two rises already this year, a close eye will be kept on Fed Chair Janet Yellen's successor, Jerome Powell, to see if he agrees with this course of action in 2018, or whether her recent lean towards a loose monetary policy still has time to play out.
"This rate hike appears to be based on anticipated growth in the coming months following President Trump's tax reforms. With further rises predicted, the question now is how far the Fed will go as we head into the new year."
KATE WARNE, INVESTMENT STRATEGIST, EDWARD JONES, ST. LOUIS:
"Pretty much as expected. The concern had been the dot plots would show four rate hikes and the message would be even with low inflation we need to keep moving more steadily in order to raise rates and get back to more normal interest rates even without higher inflation. Instead we got language that said inflation is lower than we expected and we are not going to move as long as inflation stays low. That is why you are seeing the equity market react modestly positively.
"So it's not a big surprise, but it's a shift in the direction of saying the Fed is going to keep watching the data and if we don't see higher inflation we could see fewer rate hikes in 2018.
"It was slightly more dovish and the fact we got two dissents also is slightly more dovish. It shows at least some members of the Fed don't see any reason to keep hiking rates in an environment where the economy is growing more strongly but certainly not overheating and where inflation hasn't become a problem and doesn't look like it is going to be one.”
STOCKS: S&P 500 <.SPX> extends modest gains
BONDS: U.S. Treasury yields decline to session lows, 2s <US2YT=RR> at 1.81 pct; 10s <US10YT=RR> at 2.37 pct; 2-10 spread flattens to 55.6 basis points
FOREX: The U.S. dollar dips against the euro <EUR=> and yen <JPY=>