The US Federal Reserve is poised to raise interest rates for only the second time in a decade, as policymakers set the stage for more monetary tightening amid a strengthening recovery.

Economists expect the central bank to raise its Federal funds target rate to between 0.5pc and 0.75pc this week, from the current range of 0.25pc to 0.5pc.

Markets have fully priced in a rate hike, and the focus will turn to the Fed’s latest growth and inflation forecasts, as policymakers indicate the likely interest rate path over the next few years.

Recent data suggest the US recovery is gaining traction. Unemployment fell to a nine-year low of 4.6pc in November, from 4.9pc in October, while recent surveys suggest US growth is strengthening and consumer confidence remains high.