London, November 2:

Rising inflation prompted the 12th successive increase in US interest rates, with a warning from the Federal Reserve that further rises in borrowing costs for the world’s biggest economy are in the pipeline.

A week after Ben Bernanke was named to succeed Alan Greenspan as chairman of the Federal Reserve, America’s central bank made clear that there was to be no change in policy, as it raised interest rates by a quarter-point, as expected, to four per cent.

The Fed statement said that there would only be a temporary effect on US economy from storm damage caused by Hurricane Katrina, adding that boost to growth provided by low interest rates after collapse of bubble would continue to be removed at a ‘’measured’’ pace.

Although the central bank stressed that higher energy bills and other cost increases had the potential to push up inflation, it remained confident that ‘’appropriate monetary action’’ would guarantee a continuation of low-inflationary growth.

Last night’s move had been anticipated by the majority of Fed watchers. It marks the 12th quarter-point increase since the Fed began raising rates from a 46-year low of 1 per cent in June at what it describes as a ‘’measured pace’’.

US inflation is running at a 14-year high of 4.7 per cent, largely due to record rises in the price of oil following Hurricane Katrina. High energy costs put upward pressure on inflation, although US light crude has since fallen to under $60 a barrel.

The US has also seen record rises in house prices of about 14 per cent a year, making the Fed wary of leaving rates on hold. Despite blows to consumer confidence from increased petrol prices following Hurricanes Katrina, Rita and Wilma, figures out last week showed the US economy grew at a faster-than-expected rate of 3.8 per cent year on year in the third quarter.

Analysts said the Fed was likely to raise rates by a further quarter-point at its pre-Christmas meeting with another rise likely in January, so borrowing costs may have hit 4.5 per cent when Bernanke takes over.

Bernanke, chief economic adviser to President George Bush, is believed unlikely to change significantly the direction of the Fed, although he is keener on the inflation targeting approach pursued by the Bank of England than is Greenspan.