London, March 29:

The US federal reserve, under its new chief Ben Bernanke, raised interest rates by a quarter point to 4.75 per cent, their highest level in nearly five years, as it sought to head off inflationary pressures and cool the economy.

The move is the 15th the US central bank has made since former chairman Alan Greenspan began raising rates from a 46-year low of one per cent in mid-2004. It takes the cost of borrowing in America above British levels for only the second time in the past two decades, which financial analysts say could push the pound down against the dollar.

Bernanke, chairing his first meeting of the Federal Open Markets Committee since succeeding Greenspan last month, had been widely expected to continue tightening monetary policy both to ensure inflation did not take off and to establish his inflation-fighting credentials on world financial markets, which hang on every utterance of the Fed chief.

The central bank’s move seemed amply justified by data released earlier yesterday showing confidence among American consumers had jumped to its highest level in nearly four

years in March. The rise was much bigger than Wall Street analysts had predicted and left them thinking the Fed would not stop tightening policy.

“This will boost hopes that activity in the first half of 2006 will remain robust. It will also increase talk of the Fed raising rates again in May, to five per cent,’’ said James Knightley, economist at ING Financial Markets.

The US economy now seems to have shrugged off the blow it took from the hurricanes of last autumn and is growing robustly and starting to push up inflation. The challenge for Bernanke, however, is to apply the brakes without causing the world’s biggest economy to stall.

Nariman Behravesh, chief economist at consultancy Global Insight, expected the Fed to raise rates another notch to 5 per cent at its next meeting on May 10 and said a further rise was possible over the summer, taking rates to 5.25 per cent, particularly as Bernanke said recently there was little sign that the economy was slowing down.

“The only thing that might give the Fed pause would be a sharp correction in the housing market - a possible, but unlikely event,’’ he said.

The US housing market has been one of the Fed’s biggest concerns. Like Britain, the US has experienced a property boom driven by low interest rates and rising incomes.