Federal Reserve Raises Interest Rates Quarter-Point
B>Click here for the full statement from the Federal Reserve.
he Federal Reserve raised a key short-term interest rate by one-quarter percentage point Wednesday, the fourth increase this year.
It was part of a credit tightening campaign to bring rates back up to more normal levels now that the economy's recovery from the 2001 recession was more deeply rooted, the Associated Press said.
Also know 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 said the economy "appears to be growing at a moderate pace despite the rise in energy prices, and labor market conditions have improved."
The Fed's current rate-raising campaign began in June with a quarter-point boost, marking the first rate increase in four years, AP reported.
The Fed bumped up rates again by a quarter-point in August and September and then once more Wednesday. Economists believed the odds were increasing for the Fed to boost the funds rate again on Dec. 14, at its last meeting of the year, AP reported.
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 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 rise in energy prices, and labor market conditions have improved. 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 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, and Kansas City.
