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 The BBC's Richard Quest reports from New York"Wall Street shrugged it all off"  real 28k  |
The Federal Reserve, central bank of the United States, decided that it was time to put yet another dampener on the US economy, and most analysts agree that more rate rises are still to come.
In a statement the Fed's rate-setting Open Market Committee said it had acted because there was a threat of "inflationary imbalances that would undermine the economy's record economic expansion".
It was its fifth rate rise in nine months.
The Committee believes the risks are weighted mainly toward conditions that may generate heightened inflation pressures in the foreseeable future.  |
Federal Open Market Committee
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Wall Street analysts had expected the move, saying that the Fed had little other choice given the strong performance of the US economy and first signs of inflationary pressures.
Many experts believe that the US economy is on the verge of overheating, with growth high, unemployment low and consumer demand rising, being fuelled by huge paper profits on the stock markets.
Now wages are edging upwards and the recent rise in oil prices is pushing up inflation too.
Unless something really drastic happens between - like the economy starts growing at a 4% rate instead of a 6% rate, I think the Fed will raise rates again in May." |
Michael Gregory, Lehman Brothers
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The Fed's chairman, Alan Greenspan, has repeatedly said that he does not target certain share price levels. However, a stock market correction would certainly do much to cool the US economy.
Us stock markets had expected the rate rise and reacted calmly to the Fed's decision. The Dow Jones index posted strong gains, and even the recently much-battered Nasdaq index was in positive territory.
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