WASHINGTON, May 3 (Xinhuanet) -- The US Federal Reserve raised federal funds rate, the interest commercial banks charge each other on overnight loans, a quarter percentage point to 3 percent from 2.75 percent on Tuesday.

    This was the eighth straight increase in interest rates since the central bank began tightening credit supply last June, when the key interest rate stood at a 46 year low of one percent.

    "Even after this action, the stance of monetary policy remains accommodative and, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity," the Fed's Federal Open Market Committee(FOMC), which sets monetary policy, said in a brief statement following its regular meeting.

    US economic growth slowed down in the first three months of this year, according to preliminary government estimates. The FOMC noted the slowdown, saying "Recent data suggest that the solid pace of spending growth has slowed somewhat, partly in response to the earlier increases in energy prices."

    "Pressures on inflation have picked up in recent months and pricing power is more evident," it said.

    But it said that labor market conditions apparently continue to improve gradually.

    "The committee perceives that, with appropriate monetary policy action, the upside and downside risks to the attainment of both sustainable growth and price stability should be kept roughly equal," it said.

    The FOMC also retained a promise it has been making for the past year to move rates up "at a pace that is likely to be measured," a phrase interpreted by the market as signaling continued small quarter-point rate increases.

    "Nonetheless, the committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability," the FOMC said.

    Many economists expect the Fed to keep boosting the federal funds rate for the rest of this year with more quarter-point increases until it reaches a neutral point, where the rate is neither stimulating economic growth or depressing growth. They believe the neutral level could be around 4.25 percent. Enditem