Fed’s 0.25% hike first in four years

THE US Federal Reserve raised its target for a key short-term interest rate by a quarter percentage point yesterday, the first such increase in nearly four years, but said it expected inflation to stay “relatively low.”

At the end of a two-day policy meeting, central bankers raised their target for the Fed funds rate, an overnight lending rate that influences other borrowing costs throughout the economy, to 1.25% from 1%, which had been the lowest level in more than 40 years. It was the first such increase since May, 2000.

In the closely-watched statement accompanying its decision, the Fed’s policy committee noted improvement in the economy, including “improved” labour market conditions, but made fairly sanguine comments about inflation, which has shown signs of accelerating recently.