US Fed defies Trump and raises interest rates to 2.25-2.5%

The US Federal Reserve on Wednesday defied President Donald Trump and raised interest rates by 0.25% to a target range of 2.25%-2.5%, but lowered forecasts for future increases.

Estimates showed the Fed was looking at two rate increases in 2019 instead of three as previously expected. Officials now expect economic growth of 2.3% in 2019, down from the 2.5% they anticipated in September.

Citing an editorial in the Wall Street Journal calling for a pause in rises, Trump piled on the pressure on Tuesday, warning the central bank to avoid making "yet another mistake". Trade, home and car sales have all fallen as a result of Trump's international tariff wars as they are sensitive to higher interest rates.

"Feel the market, don’t just go by meaningless numbers. Good luck!" he said.

However Fed Chairman Jerome Powell and fellow board members voted unanimously for the rise.

"Information received since the Federal Open Market Committee met in November indicates that the labour market has continued to strengthen and that economic activity has been rising at a strong rate," the Fed said in a statement.

"Job gains have been strong, on average, in recent months, and the unemployment rate has remained low. Household spending has continued to grow strongly, while growth of business fixed investment has moderated from its rapid pace earlier in the year."

"On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2%. Indicators of longer-term inflation expectations are little changed, on balance."