Fed voted unanimously for rate rise

The 10-member body all voted in favour of an aggressive rate rise

The US central bank, the Federal Reserve, voted unanimously for an aggressive interest rate rise last month to ward off any uptick in inflation, according to minutes released on Thursday.

The 10-member Federal Open Market Committee, headed by Federal Reserve Chairman Alan Greenspan, voted to raise interest rates by 0.5% to 6.5% in May.

The size of the May rate rise took the market by surprise as the biggest increase in five years.

Although there was little chance of an immediate rise in inflation, strong consumer demand, business activity and the tight US labour market gave reason for a strong rate rise, the Fed said in its minutes.

"The members saw little risk in a relatively aggressive policy move, given the strong momentum of the expansion and widespread market expectations of such a move," according to the minutes.

The meeting's minutes were released a day after the Fed decided to keep rates on hold at its most recent meeting, as most analysts had expected.

But the Fed hinted at future rate rises, warning of persistent inflationary pressures.

If rates go up again, it would affect the US stock market, currency markets, and worldwide interest rates, which have been rising sharply in recent months.

The Fed has been gradually raising interest rates in order to cool the US economy and reduce inflationary pressures.

Key to all the Fed's deliberations this summer is whether the US economy can achieve a soft landing after its unprecedented boom.

A string of recently released economic data suggested a gradual slow-down of the economy, but on Wednesday new figures releases by the Commerce Department cast doubt on this interpretation.

Orders for US durable goods surged 6% in May, driven by strong demand for electronics. Wall Street economists had forecast that orders would increase a mere 2.8%.

Raising interest rates is the best way to stop an economy from overheating, a move needed to reduce the chances of inflation taking a grip.

By increasing interest rates, consumers find it costs more to borrow money to buy everything from houses and cars to a new television.

This, in theory, leads to a drop in spending and so an overall dip in economic growth.