The U.S. Federal Reserve today voted to raise its key overnight lending rate by 25 basis points amid signs that the American economy is still growing strongly.

The rate hike was the 12 in a row by the U.S. central bank since last year and lifts the federal funds rate to 4.0% in a bid to keep a lid on inflation.

In its statement the Fed said, “Elevated energy prices and hurricane-related disruptions in economic activity have temporarily depressed output and employment. However, monetary policy accommodation, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity that will likely be augmented by planned rebuilding in the hurricane-affected areas.”

The U.S. government reported last week that third-quarter GDP grew at an annual rate of 3.8%. That was well above expectations and came despite hurricanes Katrina and Rita.

High energy prices boosted the consumer price index by 1.2% in September, the biggest monthly rise in the CPI in 25 years.

This morning, the U.S. Institute for Supply Management reported that its index of manufacturing activity held strong, providing another indication that the U.S. economy could be in for another quarter of robust expansion.

This was one of the last Fed meetings chaired by Alan Greenspan. After almost 19 years as Fed chair, Greenspan will step down in January and will be succeeded by former Fed governor Ben Bernanke. Like Greenspan, Bernanke is expected to continue to focus on fighting inflation.

http://www.federalreserve.gov/boarddocs/press/monetary/2005/20051101/default.htm