In a move widely expected by markets, the Federal Reserve has increased rates for the second time this year by a further 25bps, and has indicated it is still planning to raise them once more in 2017, despite weaker economic data.
Following a two-day meeting, the Federal Open Market Committee (FOMC) has voted by a majority of 8 to 1 to increase the Federal Funds Rate to 1%-1.25% from 0.75%-1%.
This is the Fed's third consecutive quarterly increase after the central bank hiked rates in March and December 2016, by 25bps each time.
The central bank is also still on track to raise rates one more time this year, according to the FOMC's projections which have remained unchanged since its March meeting, despite the market expecting today's decision to be the last hike of 2017.
This also comes despite the probability of another rate hike this year dropping to around 28% from 48%, according to Bloomberg, after weak economic data reports in the run-up to the decision.
Fed chair Janet Yellen said she "continues to expect the ongoing strenght of the economy" would warrant further rate hikes over the next two years.
She said: "Our outlook is that we anticipate further increases this year and next year and our statement indicates if the economy continues to evolve in the manner we expect, we feel the conditions will be in place to continue the process this year."
The FOMC said: "Information received since the Federal Open Market Committee met in May indicates the labour market has continued to strengthen and economic activity has been rising moderately so far this year.
"In view of realized and expected labour market conditions and inflation, the committee decided to raise the target range for the federal funds rate to 1%-1.25%.
"The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2% inflation."
The FOMC also signalled it will begin to implement a balance sheet normalisation programme this year, which will see it cutting its holdings of bonds and other securities, in a sign of its confidence about the US economy.
The news comes despite softer data coming out of the US, with figures released on the day of the hike showing that, on a year-over-year basis, the core version of consumer price inflation slowed for the fourth month in a row, to 1.7% in May.
The dollar was trading lower following the weak economic readings, with the Bloomberg Dollar index dropping to lows last seen in October 2016, but started rising slightly on the news.
Benchmark 10-year treasury yields also suffered falls on the day, but were seeing a small rebound on the news; they remained nearly 4% lower at 2.1238% following the central bank's decision.
The S&P 500 index was also slightly lower, at 2,439 points, 0.1% down.
Follow Investment Week on LinkedIn
Amundi CFO elected vice president
Video series continues
Hired financial planner
Favouring non-sterling denominated bonds