The Federal Reserve lifted interest rates for a 16th straight time last night and said it would keep raising them if necessary to check inflation.
In announcing its decision, the Fed emphasised that future moves would be highly dependent on how the economic outlook unfolds, and it scaled back the forward-looking guidance it had been giving financial markets.
The unanimous decision by the central bank's policy-setting Federal Open Market Committee (FOMC) took the benchmark federal funds rate target up a quarter-percentage point to 5 per cent, its highest since April 2001.
Although the decision was widely expected, the carefully crafted statement from the FOMC, which was meeting for only the second time under new Fed Chairman Ben Bernanke, was a bit more hawkish than financial markets had expected.
"The committee judges that some further policy firming may yet be needed to address inflation risks but emphasises that the extent and timing of any such firming will depend importantly on the evolution of the economic outlook as implied by incoming information," the statement said.
Prices for stocks and US government bonds fell immediately after the decision was announced, while the dollar rose. But at the end of the day, financial market prices were little changed.
Although futures markets pushed odds of a rate increase at the Fed's next meeting at the end of June up to 50 per cent in the immediate aftermath of the announcement, they quickly slipped back to about 40 per cent.