The US Federal Reserve decided Wednesday to raise the federal funds rate, the interest commercial banks charge each other on overnight loans, by a quarter percentage point to 2 percent from 1.75 percent.

This was the fourth time in a row this year the central bank moved to push up the federal funds rate, which is the Fed's primary tool for influencing economic activity.

The Fed started raising interest rates last June with the federal funds rate at a 46-year low of one percent. The three quarter-point rate hikes in June, August and September have boosted the funds rate to 1.75 percent.

At the same time, bank's prime lending rate, the benchmark for consumer and business loans, has risen from 4 percent in June, the lowest level since 1958, to 4.75 percent.

Wednesday's rate hike will push bank's prime lending rate up further to 5 percent. But that is still well below the 9.5 percent level for the prime rate in early 2001.

The Fed's decision to raise federal funds rate for the fourth time came after a government report showed that the job market performed far better than expected.

The US economy added 337,000 new jobs in October, registering the biggest one-month gain in seven months and more than double what had been forecast.

Analysts believe that the big surge in hiring was the strongest signal that the economy is starting to regain steam after cooling off during the summer largely because of soaring energy prices.

They also expect the rate hike on Wednesday to be followed by another quarter-point rise at the Fed's final meeting of the year on Dec. 14.