Fed Raises Interest Rates to 1.5 Percent

As expected, the U.S. Federal Reserve has raised short-term interest rates by a quarter of a point to 1.5 percent.

It says the rise in oil prices has curbed economic activity and softened the labor market but believes this will only be temporary and the economy can expect to expand down the track.

It was the second rate rise since June 30, when Federal Reserve chairman Alan Greenspan and his colleagues edged up the key rate from a 1958 low of 1 percent in a preemptive anti-inflation strike.

The step was widely expected because a failure to carry on a promised program of gradual increases in rates could have spread fears about the true state of the economy.

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