The Federal Reserve raised US interest rates for the first time in four years on today, boosting them a quarter percentage point in the first of a likely series of increases to keep inflation at bay.
The decision by the US central bank's policy-setting Federal Open Market Committee moves the benchmark federal funds rate - which affects credit costs throughout the economy - to 1.25 per cent.
Today's decision formally ends an easing cycle that began in 2001 and took the key rate to 1 percent, its lowest level since 1958.
With the US economy gaining momentum, enough to generate 1.2 million jobs so far this year, the Fed is expected to move rates up gradually in several steps this year and into 2005.
In its post-meeting statement, the central bank repeated a pledge to follow a "measured" pace, which markets have taken to imply it will opt for a course of smaller, quarter-point rate increases rather than larger ones. However, it said it would respond to changing economic prospects as needed.