Fed ups US interest rate to 4.75%

Mr Bernanke is maintaining the Fed's close watch on inflation

The Federal Reserve has raised US interest rates again, by a quarter of a percentage point to 4.75%.

The widely expected rise came at the end of the first interest rate meeting held by new Fed chairman Ben Bernanke.

Rates have increased from 1% over the past 20 months and are now at their highest level since April 2001.

The Fed said economic growth had "rebounded strongly", but left the door open for further rate increases as it tries to contain the risk of inflation.

Market reaction

Most market watchers now expect the Fed to raise interest rates at least once more over the coming months, to 5%.

Economic growth has rebounded strongly in the current quarter Federal Reserve Bernanke, the new Fed boss Profile: Ben Bernanke

"I think they're probably going to do one more at the next meeting for another quarter percent because they think that inflationary figures are still running a little higher than they would like," said Bob Moulton, president of American Mortgage Group.

"I think one more Fed increase and then we should be done."

The Fed's suggestion that further rate rises were on the cards sent equity markets falling after the gains seen earlier in the day.

The Dow Jones index of leading shares slumped by 96 points to close at 11,154.

The dollar rose against most other currencies on the prospect of higher borrowing costs, which tend to enhance its attractiveness to investors.