The United States Federal Reserve has raised its benchmark interest rate by 25 basis points to a range of 3.75 per cent to 4 per cent as policymakers respond to continued inflationary pressures.

The increase marks the first interest rate hike by the central bank in more than three years and comes as higher fuel prices and other economic pressures continue to affect the US economy.

The Federal Reserve said economic activity remained solid, although uncertainty had increased partly because of geopolitical developments. It also noted that domestic spending had remained resilient.

Inflation, however, continues to remain above the central bank’s 2 per cent target. Consumer prices increased by 0.4 per cent in August, while annual inflation stood at 3.4 per cent, unchanged from July.

Higher fuel prices have added to the pressure on consumers, with crude oil prices rising amid the ongoing conflict involving the United States and Iran.

The average US petrol price has also increased, reaching about $4.36 per gallon, up from $4.06 a month earlier.

The Federal Reserve indicated that its latest decision was intended to support a return of inflation towards its 2 per cent objective.

Officials’ projections indicate that another rate increase could be implemented later in the year, while interest rates are expected to remain unchanged through the following year.

The rate decision comes just weeks before the US midterm elections and follows continued pressure from President Donald Trump for lower borrowing costs.