The Federal Reserve hiked the key short-term interest rate by 25 basis points on Tuesday, bringing the fed funds target rate to 1.50%.

The move was highly-anticipated as Fed Chairman Alan Greenspan and the Federal Open Market Committee made its intentions clear to raise rates at a measured pace during its June 30 meeting. The Fed plans to raise rates to counter inflation.

Most analysts had expected the rate increase even as weaker-than-expected job data was released recently. To leave rates unchanged might have spooked the markets, giving the impression that the Fed views the recent job news as an indicator of something more severe.

The Fed blamed recent weakness in the market on high oil prices and said the economy looks "poised to resume a stronger pace of expansion going forward."

The next Fed meeting will take place on Sept. 21.

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