The US Federal Reserve has increased interest rates for the second time in three months.

Its key rates were pushed up 25 basis points to a target range of 1.00% to 1.25%, with the Fed citing continued economic growth and job market strength in the US as the reasons for the rise.

The US jobless rate fell to a 16-year low last month.

It is the second of three planned hikes this year and was broadly anticipated ahead of the announcement

US rates are now at their highest level in nine years.

Fed chair Janet Yellen (pictured above) said that the prospects for world’s largest economy remained bright, with GDP growth of 2.2% now penned in for 2017.

The Fed also outlined its plan to reduce its $4.2 trillion (€3.7tn) portfolio of Treasury bonds and mortgage-backed securities, chiefly purchased after the financial crisis hit.

It said in a statement:

"The committee currently expects to begin implementing a balance sheet normalisation programme this year, provided that the economy evolves broadly as anticipated."

Yellen said at a press conference that the reduction should be "gradual" and "predictable", adding that "we continue to feel the economy is doing well."

The dollar strengthened slightly after the announcement while US stock markets took it in their stride, though there was some further unrelated softening of key tech stocks such as Amazon, Facebook and Google.

Later today, the Bank of England is expected to leave UK interest rates unchanged at historic lows of 0.25% on the basis that fast-rising UK inflation is being imported because of weaker sterling rather than signalling any overheating of the UK economy.