Fed raises US interest rate

INTEREST rates in the US were raised tonight for the first time in four years. The Federal Reserve's Open Market Committee voted to raise the central bank's key fed funds rate from 1% to 1.25%. The change was considered a certainty by commentators in the US and the UK.

The chief concern before the announcement was about the Fed's plans for interest rates in the months ahead.

Market watchers take the Fed's pledge for 'measured' rate rises, made earlier this year, to mean a series of quarter-percentage point increases rather than hikes of a half- percentage point or larger.

Tonight's news of a move away from 46-year lows was accompanied by a statement which said: 'With underlying inflation still expected to be relatively low, the committee believes that policy accommodation can be removed at a pace that is likely to be measured.'

The committee said it would respond to changes in the economy as needed.

This was taken to mean that future increases are likely to be in small steps.