The US Federal Reserve has raised interest rates and outlined plans to reduce its massive balance sheet as policymakers signalled another rate hike this year despite a double dose of soft economic data.

Policymakers raised the Federal Funds target range to between 1pc and 1.25pc on Wednesday, up from 0.75pc to 1pc.

While the tightening represents the second rate rise this year, it is just the fourth increase since the financial crisis, when policymakers pushed rates down to zero.

The Fed’s decision to tighten policy also contrasts with the Bank of England, which cut rates last August in the wake of the Brexit vote and is expected to maintain rates at a record low of 0.25pc on Thursday.

US officials maintained a projection of one more rate hike in 2017 amid slightly stronger growth projections and downward revisions to its unemployment forecasts after the jobless rate fell to a 16-year low in May.