WASHINGTON, Sept. 20 (Xinhuanet) -- US Federal Reserve (Fed) on Tuesday raised its target short-term interest rate by another one quarter percentage point to 3.75 percent and signaled more rate hikes were likely in the coming months.

    This was the 11th consecutive action the central bank has takento tighten credit since June 2004 when the federal funds rate, theinterest commercial banks charge each other on overnight loans, stood at a 46-year low of one percent.

Clerks react in the Euro Dollar pit at the Chicago Mercantile Exchange after the United States Federal Reserve raised US interest rates Sept. 20, for an 11th straight time. (Xinhua/Reuters)

    Before the decision made on Tuesday, some economists had believed that Hurricane Katrina, which slammed into the Gulf Coastlate last month and turned out to be the nation's costliest natural disaster, might prompt the Fed to pause temporarily in its campaign to drive interest rates higher to keep inflation in check.

    However, the Fed said that Katrina's impact on the overall economy was likely to be short-lived.

    In its brief statement announcing the decision, the Fed said that all the problems from Katrina "will be a setback in the near term" for the economy. But the Fed did not believe that Katrina would "pose a more persistent threat."

    At the same time, the Fed signaled that more rate hikes could be expected. The statement retained the language it has used in the past to describe the current level of interest rates as "accommodative".

    "Monetary policy accommodation, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity," the statement said.

    It also said that "higher energy and other costs have the potential to add to inflation pressures. However, core inflation has been relatively low in recent months and longer-term inflationexpectations remain contained."

    In its statement, the Fed also kept the language stating it "believes that policy accommodation can be removed at a pace that is likely to be measured". That language has been interpreted as signaling further gradual quarter-point rate hikes.

    On Tuesday, the Fed also approved an increase of one quarter percentage point in the discount rate to 4.75 percent. Enditem