The U.S. Federal Reserve has raised its key interest rate by a quarter of a percentage point in its continuing effort to rein in inflation.

After a two-day meeting of the Federal Open Market Committee(FOMC) on Wednesday, the Fed said in a statement that it raised its benchmark short-term interest rate by 25 basis points.

The new target range is four-point-75 percent to five percent, reaching the highest level since 2007.

The Fed appears to have followed market expectations with a "baby step" as financial unrest continued due to the bankruptcy of Silicon Valley Bank.

In a statement released after the FOMC meeting, the Fed acknowledged that recent strains on the nation’s banks will hamper the economy but added that the U.S. banking system is sound and resilient.

Fed policymakers projected rates would end 2023 at about five-point-one percent, unchanged from their median estimate from December, implying that one more hike is expected before pausing.

The Bank of Korea’s benchmark rate is now one-point-five percentage points lower than the Fed’s, the largest gap in 22 years.