Fed raises interest rate again
The US Federal Reserve raised a key short-term interest rate by 0.25% today, the fourth increase this year.
It is part of a credit tightening campaign to bring rates back up to more normal levels now that the US economy’s recovery from the 2001 recession is more deeply rooted.
Fed chairman Alan Greenspan and his Federal Open Market Committee colleagues - the group that sets interest rate policy in the United States – increased the target for the federal funds rate to 2%.
The funds rate is the interest banks charge each other on overnight loans and is the Fed’s primary tool for influencing economic activity.
As a result of the decision, commercial banks were expected to increase by a corresponding amount their prime lending rate for many short-term consumer and business loans to 5%.
The Fed’s current rate-raising campaign began in June with a quarter-point boost, marking the first rate increase in four years.
It bumped up rates again by a quarter-point in August and September and then once more today.
Fed policy-makers stuck to their view that future rate increases would be gradual. They said rates could go up at a pace likely to be “measured”, retaining language contained in previous statements.
On the economy, the Fed said that it “appears to be growing at a moderate pace despite the rise in energy prices and labour market conditions have improved”.
The vote was unanimous.
