The Federal Reserve Tuesday raised its bellwether federal funds rate target by a quarter-percentage-point to 3.50 percent, its 10th straight rise, and offered no sign that its campaign of increases was nearing an end.

The unanimous decision by Fed Chairman Alan Greenspan (search) and the Federal Open Market Committee (search) is part of a credit-tightening campaign to bring rates back up to more normal levels.

The panel said rates are still low enough to lend support to the economy and repeated that it expected to continue to remove monetary stimulus at a "measured" pace, suggesting further quarter-point moves ahead.

In an effort to head off inflation risks in a growing economy, the Fed began in June 2004 to push up the federal funds rate (search) that banks charge each other for overnight loans from a 1958 low of 1 percent. The fed funds rate has risen 2.5 percentage points over that period and economists expect it to hit 4 percent or higher by year end.

The Fed is expected to pause in its rate-rise campaign eventually but has been vague about timing. The halt is likely to come when rates hit a level the Fed deems "neutral," one that neither slows growth nor stimulates inflation. Economists say a neutral fed funds rate lies somewhere between 3 percent and 5 percent, but policy makers have been loath to pin that down.

Many analysts believe the Fed will keep raising interest rates at its final three meetings of the year, in September, November and December, leaving the funds rate at 4.25 percent at year's end. The rate rise comes after a slew of data showing the U.S. economy's pulse quickening despite record energy prices and climbing short-term borrowing costs.

A rapid pickup in inflation — if not blunted by other economic forces — can erode workers' paychecks and drive up business costs. If inflation is bad enough, it can short circuit economic growth. The Fed is being especially watchful for any sign that the strengthening labor market is fanning inflation, economists said.

The Fed's action comes after a series of largely positive economic readings.

Employers cranked up hiring in July, adding 207,000 jobs. That was up from 166,000 jobs in June.

The economy as a whole expanded at a chipper 3.4 percent pace in the second quarter — even in the face of expensive energy. Economic growth is expected to top a 4 percent pace in the July-to-September period.

Still, energy prices continue marching higher. Oil prices set a new record Monday, closing at a high of $63.94 a barrel. Gasoline prices last week averaged $2.37 a gallon nationwide, a new high.

"Aggregate spending, despite high energy prices, appears to have strengthened since late winter, and labor market conditions continue to improve gradually," the Fed said in a statement outlining its decision.

"Core inflation has been relatively low in recent months and longer-term inflation expectations remain well contained, but pressures on inflation have stayed elevated," it added.

U.S. Treasury debt prices turned positive as the Fed's statement proved less jubilant on U.S. growth prospects than many investors had expected.

Tuesday's Fed decision was followed by an announcement by commercial banks that they were increasing their prime rate, the benchmark for millions of consumer and business loans, by a similar quarter-point. That would put the prime at 6.5 percent, its highest point in four years.

Reuters and The Associated Press contributed to this report.