To no one’s surprise, the Federal Reserve Board Wednesday hiked interest rate by 25 basis points and said further increases would be at a “measured” pace as it strives to hold the line on inflation.

The U.S. central bank’s policy-setting Federal Open Market Committee said it was upping the benchmark federal funds rate — which affects credit costs throughout the economy —- to 1.25%.

It is the first increase since 2001 when the fed began to ease rates, taking the key rate to 1%, its lowest level since 1958. But with the economy gaining momentum, enough to generate 1.2 million jobs so far this year, the Fed is expected to move rates up gradually in several steps this year and into 2005.

In its statement the committee said the upside and downside risks to the attaining both sustainable growth and price stability for the next few quarters “are roughly equal.

“With underlying inflation still expected to be relatively low, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured.”