The US Federal Reserve raised its benchmark lending rate on Wednesday to the highest level since 2001 to tackle above-target inflation and signalled the possibility of further increases ahead.

The quarter percentage-point rise lifts the Fed’s key lending rate to a range between 5.25 per cent and 5.5pc, the US central bank said, adding that it will “continue to assess additional information and its implications for monetary policy.”

The rate-setting Federal Open Market Committee (FOMC) used similar language when it voted to hold rates steady in June, and the latest statement suggests that policymakers are mulling another pause at their next meeting in September.

However, the Fed also said it would assess a range of data points “in determining the extent of additional policy firming,” which indicates that they also see more monetary tightening ahead.

This would be in line with the median forecast of two additional rate hikes this year at the last FOMC meeting in June.

The quarter percentage-point hike on Wednesday, which was also in line with analysts’ expectations, is the Fed’s 11th since it began an aggressive campaign last March in response to rising prices.

After peaking last year, US inflation continues to slow, but it is still above the Fed’s long-term target of 2pc — suggesting more policy action may be needed.