US interest rates raised to 1.5%

All eyes on Greenspan: Traders watch the chairman on television

The US Federal Reserve has raised interest rates by a quarter of a percentage point to 1.5%.

The widely anticipated decision follows June's increase to 1.25%, the first upward move for four years.

The US central bank is trying to curtail inflationary pressures without obstructing economic growth.

The rise comes despite the release last Friday of weaker-than-expected US unemployment data, which raised doubts about the strength of the economy.

'Poised for growth'

The central bank's policy-setting Federal Open Market Committee voted unanimously to raise the benchmark federal funds rate, which influences credit costs throughout the US economy.

Explaining its decision, the Federal Reserve said: "In recent months, output growth has moderated and the pace of improvement in labour market conditions has slowed."

It added: "This softness likely owes importantly to the substantial rise in energy prices. The economy nevertheless appears poised to resume a stronger pace of expansion going forward."

The central bank said the risks to the US economy remained balanced between weaker growth and higher prices.

But the Fed reiterated a pledge that it would only make future rate rises "at a pace that is likely to be measured".

Inflation fears

The decision to raise interest rates came as the price of a barrel of US light crude oil touched a record high of $45.04, earlier on Tuesday.

When the Fed raised rates in June, it was widely perceived to be the first of a series of gradual moves, aimed at keeping inflation in check and sustaining economic growth.

Official figures published last week showing just 32,000 payroll jobs were created in July shocked financial markets.

Several economists had expected 200,000 jobs to be created in the month.