Fed Again Raises Interest Rates by Quarter-Point
B>Click here for the full statement from the Federal Reserve.
he Federal Reserve on Tuesday raised interest rates another quarter-point and said the economy had been hit by energy costs but was poised for faster growth.
The unanimous decision by the Federal Open Market Committee moves the benchmark federal funds rate to 1.5%.
"Output growth has moderated and the pace of improvement in labor market conditions has slowed," the Fed said in a statement.
The funds rate had been at a 46-year low of 1% just six weeks ago when the Fed raised it to 1.25% the first increase in four years.
Also Tuesday, commercial banks increased their prime lending rate by a similar quarter-point, pushing the benchmark for millions of consumer and business loans to 4.5%.
The Fed's next meeting is scheduled for Sept. 21. While another rate increase could come at that time, analysts said it will depend on the data between now and then, the Associated Press reported. 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 1-1/2 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. In recent months, output growth has moderated and the pace of improvement in labor market conditions has slowed. This softness likely owes importantly to the substantial rise in energy prices. The economy nevertheless appears poised to resume a stronger pace of expansion going forward. Inflation has been somewhat elevated this year, though a portion of the rise in prices seems to reflect transitory factors.
The Committee perceives the upside and downside risks to the attainment of both sustainable growth and price stability for the next few quarters are roughly equal. With underlying inflation still 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 2-1/2 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.
