WASHINGTON — The Federal Reserve is raising its key interest rate for the third time this year and foresees three additional hikes in 2018.

The Fed announced Wednesday that it’s lifting its short-term rate by a modest quarter-point to a still-low range of 1.25 percent to 1.5 percent. It also is continuing to slowly shrink its bond portfolio. Together, the two steps could lead over time to higher loan rates for consumers and businesses and slightly better returns for savers.

The central bank said in a statement after its latest policy meeting that it expects the job market and the economy to strengthen. Partly as a result, it expects to keep raising rates at the same incremental pace next year under the leadership of Jerome Powell, who will succeed Janet Yellen as Fed chairman in February.

The Fed’s action was approved 7-2, with Charles Evans, president of the Fed’s Chicago regional bank, and Neel Kashkari, head of the Minneapolis Fed, voting no. Both preferred to keep the benchmark rate unchanged.

Its projections for future hikes, based on estimates of the 16 officials who took part in the rate discussions, showed that the median expectation remains three rate hikes in 2018, at least two in 2019 and two more in 2020.

By then, the Fed’s target for short-term rates would have reached 3.1 percent — slightly above its current estimate of a long-term neutral rate of 2.8 percent. That would mean the Fed would still be seeking to tighten credit three years from now.

Investors are looking to Yellen’s final scheduled news conference as Fed chair for any clues to what the central bank might have in store for 2018 under Powell. Powell has been a Yellen ally who backed her cautious stance toward rate hikes in his five years on the Fed’s board.

Powell will be joined by several new Fed board members who, like him, are being chosen by President Donald Trump. Some analysts say they think that while Powell might not deviate much from Yellen’s rate policy, he and the new board members may adopt a looser approach to their regulation of the banking system.

On Wednesday, the Fed boosted its forecast for growth to 2.5 percent next year, up from its previous forecast of 2.1 percent. But it then foresees growth slowing to 2.1 percent in 2019 and 2 percent in 2020.

The Fed modified its forecast to take into account that unemployment has fallen lower this year than it had expected. For the next two years, the Fed projects that unemployment will decline from the current 4.1 percent to 3.9 percent in 2018 and 2019 and then tick up to 4 percent in 2020.

It also expects inflation to rise from 1.7 percent this year to 1.9 percent in 2018 and 2 percent in 2019. The Fed’s inflation target is 2 percent, But it has puzzlingly remained below that level for more than five years.