After a two-day policy meeting, the Federal Reserve confirmed economist predictions by raising interest rates yet again. When considering the Bank’s plans to shed some of its massive $4.5 Trillion balance sheet this year, these moves may suggest that a nine year economic expansion no longer needs as much attention.

With the announcement of the benchmark interest hike, the Fed has raised benchmark rates by 25 basis points, putting it between 1% and 1.25%. The goal here is to raise costs of borrowing for businesses and consumers to ensure that the economy doesn’t go up in a frenzy, despite lower than expected inflation figures released this morning.

In light of the Fed’s decision, stocks moved very little on Wednesday afternoon. Although the dollar (DXY) came off of session lows, the Dow Jones Industrial Average (DJIA) clings on, gaining 0.22% for the day.

However, with the May consumer report released this morning, investors were more interested in the central bank’s agenda for the remainder of 2017. Lower than expected inflation figures are expected to have surprised the Feds, giving the bank more reason to take caution when considering rate increases later this year.

The Committee stuck to their plans of three rate hikes in 2017, meaning just one more rate increase this year. In their statements, the Feds note that “the Committee is monitoring inflation developments closely.”

Despite lagging inflation readings, unemployment rates are at a 16 year low of 4.3%. This is likely the reason why Federal Reserve Chairwoman Janet Yellen and other VIPs of the Fed are confident about the U.S economy. Their beliefs are evidenced by the Federal Reserve’s plans to reduce its large cache of Treasury and bond holdings that it accumulated during the Great Recession in order to accelerate the economic recovery. The overall effect is expected to add increasing pressure on interest rates in time.

Over the years, the Fed has been able to maintain a huge balance sheet simply by reinvesting proceeds from maturing Treasury bonds and mortgage – backed securities, a controversial investment strategy that was condemned by the congressional republicans.

However, the Feds now have plans to normalize their balance sheet by gradually tapering the amount of proceeds reinvested from maturing securities, and allowing some of it to runoff. Initially, $6 billion a month in principal from maturing Treasury securities will be allowed to runoff, increasing in $6 billion increments every quarter until it reaches $30 billion a month after a year’s time. Additionally, the Federal Reserve set an initial $4 billion cap with quarterly steps of $4 billion until it reaches $20 Billion a month for its mortgage-backed securities and federal agency debt.

Although the bank did not specify to what level it planned to shrink its balance sheet, the Feds made sure to note that it won’t return to the $800 billion, prerecession levels. This is all contingent of course, on whether or not the economy performs as well as expected.

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