US Interest Rates up 0.5%

US interest rates have been raised by half a percentage point to 6.5%. That is the biggest increase seen in five years, and is an attempt to slow the booming economy.

The Federal Reserve, the American central bank, announced the decision at 1415 local time (1815 GMT).

It was the sixth time rates have been increased since last June. The previous five rises had all been by 0.25%.

By the time the decision was announced US stocks had risen sharply on hopes that the current series of interest rate rises was near an end.

This had been prompted by lower than expected inflation figures for April.

Those hopes were dimmed by the statement from the Fed which said it remained concerned about growing inflationary pressures.

But after a brief dip the markets bounced back with the Dow Jones Industrial Average closing up 126.8 points at 10,934, and the Nasdaq ending up 109.9 points, or more than 3%, as the close approached.

The Fed's four paragraph statement said they remained worried about increases in demand for goods exceeding increases in supply.

The view of analysts was that there were likely to be more rate rises to follow.

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