The US Federal Reserve this evening raised interest rates another quarter of a percentage point to head off potential inflation, saying the economy had been hit by energy costs but was poised for faster growth.
The unanimous decision by the US central bank's policy-setting Federal Open Market Committee moves the benchmark federal funds rate - which influences credit costs throughout the economy - to 1.5 per cent.
It was the second quarter-point rise this year, following one announced on June 30th after the last FOMC meeting.
The Fed action, which boosted the dollar and weighed on US government bonds and the stock market, came despite anemic job growth in July as well as oil prices that hit records above $45 a barrel today.
"In recent months, output growth has moderated and the pace of improvement in labor market conditions has slowed. This softness likely owes importantly to the substantial rise in energy prices," the Fed said in a statement outlining its rate decision.
"The economy nevertheless appears poised to resume a stronger pace of expansion going forward," it added.
The central bank said the risks to the US economy remained balanced between weaker growth and higher prices, reiterating that some of the recent climb in prices appeared due to transitory factors.
They also repeated a pledge to respond to changes in the economy as needed to keep inflation under wraps - wording some in financial markets thought might shift to reflect more concern about employment.