WASHINGTON -- The US Federal Reserve on Wednesday raised its benchmark lending rate by a quarter percentage point, sending it to the highest level since 2001.

The rise increases the key rate to a range between 5.25 percent and 5.5 percent, while further widening the gap between the key rates of South Korea and the United States to an all-time high of 1.75-2.0 percentage points.

South Korea's central bank kept its benchmark rate frozen at 3.5 percent earlier this month.

Higher rates in the US are feared to prompt money outflows from Asia's fourth-largest economy, which in turn may weaken the local currency against the dollar while putting upward pressure on inflation by making imports more expensive.

The International Monetary Fund slashed its 2013 economic growth outlook for South Korea to 1.4 percent on Tuesday, down from 1.5 percent forecast three months earlier.

The Bank of Korea, the South Korean central bank, lowered its growth outlook for the country from 1.6 percent in February to 1.4 percent in May. (Yonhap)