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Loan rates up across the pond

1 July 2005

The US Federal Reserve has raised interest rates by a quarter of one per cent to 3.25 per cent.

The aim of the move is to control inflation, fuelled by rises in oil prices, while continuing economic growth that is at 3.8 per cent.

A statement from the decision-making body the Federal Open Market Committee said: "Although energy prices have risen further, the expansion remains firm and labour market conditions continue to improve gradually.

"Pressures on inflation have stayed elevated, but longer-term inflation expectations remain well contained."

The decision follows a steady series of nine small rises that started last year when rates were at a 46 year low of one per cent.

In addition to oil price rises causing inflation, the low interest rates have caused a boom in the US property market prompting increased consumer spending on home improvement items.