US Fed signals interest rates increase by midyear

In a move that would likely impact both emerging markets like India and advanced economies, the US central bank on Wednesday signalled that it would consider raising its benchmark interest rate at its June meeting.

But in a statement issued after a two-day meeting of its policy-making committee, the Federal Reserve also emphasised that it might still delay the decision to raise the rates, for the first time since the 2008 financial crisis, until later this year.

The Fed's announcement moved the central bank to the verge of ending a period of more than six years in which it has held short-term interest rates near zero.

"The march toward higher rates reflects both the Fed's optimism that the economy no longer needs quite as much help from the central bank, and a sense of fatigue about its long-running campaign to encourage faster economic growth," the New York Times said.

US Federal Reserve Chairperson Janet Yellen is expected to give the rationale of its decision at a press conference later on Wednesday.

Ahead of the Federal Open Market Committee's (FOMC) meeting, IMF Managing Director Christine Lagarde had warned that emerging markets like India must prepare for the impact of a rise in US interest rates.

In a speech at Reserve Bank of India in Mumbai Tuesday, she also warned that markets could be heading for a repeat of the 2013 "taper tantrum."

"I am afraid this may not be a one-off episode," Lagarde said. "The timing of interest-rate liftoff and the pace of subsequent rate increase can still surprise markets."