US boosts key interest rate

The United States Federal Reserve, caught between a sudden economic slowdown and heightened worries about inflation, decided to nudge a key interest rate up by another quarter-point today.

The move, which had been widely expected by financial markets, pushed the federal funds rate up to 3%. It was the eighth increase in the interest that banks charge each other on overnight loans since the central bank began its credit tightening campaign last June.

The Fed also retained a promise it has been making for the past year to move rates up "at a pace that is likely to be measured," a phrase that markets have interpreted as signalling continued small quarter-point rate increases.