The Federal Reserve has raised US interest rates for the first time in four years, boosting them by a quarter percentage point in the first of a likely series of increases aimed at keeping inflation at bay.
The decision by the US central bank's policy-setting Federal Open Market Committee moves the key federal funds rate - which affects borrowing costs throughout the economy - to 1.25%.
The decision formally ends a cycle of cuts that began in 2001 and took the key rate to 1%, its lowest level since 1958.
With the 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 Fed 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.
