The United States Federal Reserve has raised its benchmark interest rate for the first time in a year to counter strengthening inflation pressures.
Photo: AFP
The federal funds rate was raised by a quarter percentage point to between 0.50 percent and 0.75 percent, and was only the second rate rise in a decade after the central bank had slashed rates to near zero to help the US economy recover from the global financial crisis.
It also signalled that it expects to raise rates three times next year.
The rate increase had been regarded as a virtual certainty by financial markets in the wake of a series of generally strong economic reports.
"In view of realised and expected labour market conditions and inflation, the committee decided to raise the target range," the Federal Reserve's policy-setting committee said in a unanimous statement after a two-day meeting.
Inflation is expected to get a further boost from President-elect Donald Trump's promised big spending policies on infrastructure, and tax cuts.
The Fed's economic forecasts also pointed to a quicker pace of growth, and pointed to three further rate rises in both 2018 and 2019, to take the benchmark rate to 3 percent.
The decision will probably affect the cost of borrowing overseas for local banks, and will bolster expectations that the Reserve Bank of New Zealand will leave its cash rate on hold at 1.75 percent for all of next year.
The US dollar has risen about half a cent against the New Zealand currency in early trading after the decision.