Fed Raises Interest Rate Quarter-Point to 4.25%
he Federal Reserve unanimously voted on Tuesday to raise the benchmark U.S. interest rate a quarter-point to 4.25%.
It marked the 13th straight meeting dating back to June 2004 that the Federal Open Market Committee has raised rates by a quarter-point. Prior to the current ongoing tightening cycle, rates had been at a four-decade low of 1%.
The central bank stopped saying there is an "accommodation" in its policy, a sign that members consider rates high enough that they are no longer spurring economic growth, Bloomberg reported.
Tuesday's meeting was the eighth and final meeting of the FOMC for 2005. The first meeting of 2006 meeting is scheduled for Jan. 31.
By Transport Topics
Full Statement from the Federal Reserve
The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 4.25%.Despite elevated energy prices and hurricane-related disruptions, the expansion in economic activity appears solid. Core inflation has stayed relatively low in recent months and longer-term inflation expectations remain contained. Nevertheless, possible increases in resource utilization as well as elevated energy prices have the potential to add to inflation pressures.
The Committee judges that some further measured policy firming is likely to be needed to keep the risks to the attainment of both sustainable economic growth and price stability roughly in balance. In any event, the Committee will respond to changes in economic prospects as needed to foster these objectives.
Voting for the FOMC monetary policy action were: Alan Greenspan, Chairman; Timothy F. Geithner, Vice Chairman; Susan S. Bies; Roger W. Ferguson, Jr.; Richard W. Fisher; Donald L. Kohn; Michael H. Moskow; Mark W. Olson; Anthony M. Santomero; and Gary H. Stern.
In a related action, the Board of Governors unanimously approved a 25-basis point increase in the discount rate to 5.25%. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco.
