Fed Raises Rates to 3.75%
As we predicted in our Monday's posting, the Federal Reserve raised short
term interest rates again to a 3.75%, its highest since August, 2001. Fed
also said that Hurricane Katrina could fuel inflationary pressures but does
not pose a persistent threat to the U.S. economy. The statement said,
"While these unfortunate developments have increased uncertainty about
near-term economic performance, it is the committee's view that they do
not pose a more persistent threat." The committee also said,"Higher
energy and other costs have the potential to add to inflation pressures."
Language in the FOMC statement indicated that the central bank would not
pause or stop their steady rate hikes this year. The committee said current
rates remain "accommodative" and suggested again that rates could be
raised at a "measured" pace. We can expect the Fed to raise rates at a
'measured' 25 basis points per meeting through January, 2006, bringing
the Fed fund's target rate to 4.50%.
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