US Fed raises federal funds rate after one-year pause

WASHINGTON -- US Federal Reserve on Wednesday decided to raise benchmark interest rate by 25 basis points, the first and only time in 2016.

"In view of realized and expected labor market conditions and inflation, the (Federal Open Market) Committee decided to raise the target range for the federal funds rate to 1/2 to 3/4 percent," said the Fed in a statement after concluding a two-day policy meeting.

The moderate economic expansion, continued strengthening of labor market and the improvement in inflation condition supported the central bank to raise interest rate after nearly a one-year pause, according to the statement.

The Fed on Wednesday released its updated economic projections which indicate that the central bank forecasts three rate hikes next year, while in its September projections, Fed officials expected only two rate hikes in 2017.

In December last year, the U.S. central bank increased the interest rate for the first time in nearly a decade. However, a slowdown in global economy since the start of this year and low inflation condition have made Fed policymakers cautious and hold off on any further rate hikes for seven consecutive meetings this year.