US Federal Reserve raises interest rate

By Ovunc Kutlu

NEW YORK (AA) - The Federal Reserve increased its benchmark interest rate by 0.25 percent, the Federal Open Market Committee (FOMC) announced Wednesday.

FOMC members voted unanimously to raise the central bank's interest rate to 1.25 percent, the committee said in a statement.

"Job gains have moderated but have been solid, on average, since the beginning of the year, and the unemployment rate has declined," according to the statement.

The unemployment rate fell to 4.3 percent in May, from 4.4 percent the previous month, but the economy added just 138,000 jobs, less than the 185,000 that was projected.

The FOMC signaled it remains hopeful "labor market conditions will strengthen", and said it expects U.S. economic activity to strengthen.

The committee also anticipates inflation to stabilize around the Fed's target of 2 percent in the medium-term, although it currently remains below that level.

The Consumer Price Index, which measures the change of inflation, decreased 0.1 percent in May, the Department of Labor announced earlier Wednesday.

This marked the second decline for the index in the past three months. The index posted its first decline in a year in March.

It is the second time the central bank has raised its benchmark interest rate this year, and the fourth since December 2015.