Fed hikes rates and hints at more rises

AMERICA'S Federal Reserve has hiked interest rates by a quarter of a percentage point to 3% and signalled that there would be a further gradual tightening to offset inflationary pressures.

Economists had been virtually unanimous in anticipating such a rise, and the Fed chairman Alan Greenspan gave no sign that there would be a step change in its policy.

Once again, it reiterated that it would carry out further increases at a 'measured' rate to keep a curb on inflation - suggesting that further quarter-point moves were likely.

The increase was the eighth successive rise in US rates since last June. Rising fuel prices have pushed up inflation but have also caused a slowdown in consumer spending, giving policymakers 'push and pull' factors to ponder on.

The US central bank said 'pressures on inflation have picked up in recent months', but it appeared confident that this could be contained through gentle increases.