US fed funds rate hit highest in over 2 years

The key borrowing costs the U.S. Federal Reserve targets to achieve its interest rate objective rose to its highest level in over two years as traders await for clues whether the central bank would raise rates later this year.

The federal funds rate, which banks charge each other to borrow excess reserves, averaged 0.14 percent on Tuesday, the highest level since May 2013, Fed data released Wednesday showed.

Read More7 stocks most vulnerable to a Fed shock

The average fed funds rate averaged 0.13 percent on Monday for nine straight days.

The fed funds rate traded in a range of 0.07 percent to 0.32 percent, compared with Monday's 0.07 to 0.3125 percent.

Interbank borrowing costs for longer periods has been rising steadily as traders anticipate the Fed might raise short-term rates later this year as the jobs market has improved.

The Federal Open Market Committee, the central bank's policy setting group, will release a statement at 2 p.m. ET (1800 GMT) following a two-day meeting.

Half hour later, Fed Chair Janet Yellen is scheduled to conduct a press conference.

Read MoreFed doves expected to fly even with rate hike coming

Wall Street firms widely anticipate the Fed will end its near zero interest rate policy in September, while the futures market signaled traders expect such a move in December at the earliest.