Fed Raises Interest Rates to 2.25%
B>Click here for the full statement from the Federal Reserve.
he Federal Reserve on Tuesday unanimously raised the benchmark U.S. interest rate a quarter-point to 2.25%, the highest since November 2001, and again said it would carry out additional increases at a "measured" pace.
It was the fifth straight meeting dating back to June that the central bank raised rates by a quarter-point. Prior to this ongoing tightening cycle, rates had been at a four-decade low of 1%
Also known as the overnight bank-lending rate, the federal funds rate is the interest banks charge each other on overnight loans and the Fed's main lever for influencing the economy. Low rates can spur consumer and capital spending, which can help the economy and the trucking industry.
The Fed also raised the discount rate on direct loans to commercial banks to 3.25%. The discount rate is linked to the main benchmark.
It also announced it would begin releasing minutes of meetings three weeks after they take place, instead of six. November's meeting minutes are due Thursday and this meeting's minutes will be released Jan. 4.
There are eight scheduled Fed meetings in 2005; the first is Feb. 1-2. 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 2-1/4 percent.The Committee believes that, even after this action, the stance of monetary policy remains accommodative and, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity. Output appears to be growing at a moderate pace despite the earlier rise in energy prices, and labor market conditions continue to improve gradually. Inflation and longer-term inflation expectations remain well contained.
The Committee perceives the upside and downside risks to the attainment of both sustainable growth and price stability for the next few quarters to be roughly equal. With underlying inflation expected to be relatively low, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured. Nonetheless, the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability.
Voting for the FOMC monetary policy action were: Alan Greenspan, Chairman; Timothy F. Geithner, Vice Chairman; Ben S. Bernanke; Susan S. Bies; Roger W. Ferguson, Jr.; Edward M. Gramlich; Thomas M. Hoenig; Donald L. Kohn; Cathy E. Minehan; Mark W. Olson; Sandra Pianalto; and William Poole.
In a related action, the Board of Governors unanimously approved a 25 basis point increase in the discount rate to 3-1/4 percent. 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.
In addition, the Committee unanimously decided to expedite the release of its minutes. Beginning with this meeting, the minutes of regularly scheduled meetings will be released three weeks after the date of the policy decision. The first set of expedited minutes will be released at 2 p.m. EST on January 4, 2005.
