Fed raises rates again

KingPriest2 · 05-10-2006, 01:15 PM

Fed raises rates again
Central bank boosts key short-term rate to 5%, says further hikes 'may yet be needed' depending on economic reports.
May 10, 2006: 2:40 PM EDT

NEW YORK (CNNMoney.com) - The Federal Reserve raised its short-term interest rate target another quarter of a percentage point Wednesday - the 16th straight time that the central bank has raised rates.

The Fed's policy-making committee added in its statement that it may need to keep raising rates but that the timing of the increases will depend on economic data.

"Some further policy firming may yet be needed to address inflation risks but ... the extent and timing of any such firming will depend importantly on the evolution of the economic outlook as implied by incoming information," the Fed said in its statement. (To read the statement, click here.)

The central bank's fed funds rate now stands at 5 percent, the highest since March 2001. Short-term rates were at historical lows when the Fed began its rate-hiking campaign in June 2004.

The fed funds rate, an overnight bank lending rate, affects the rates consumers pay on credit cards, auto loans, home equity lines of credit and other types of debt.

The Fed has been raising rates in a bid to keep inflation at bay. But despite concerns about rising energy prices, as well as signs that the economy is still healthy, there is a growing feeling among some economists and investors that the Fed risks hurting economic growth if it keeps boosting rates.

In its statement, the Fed said that "economic growth has been quite strong so far this year" but that growth "was likely to moderate to a more sustainable pace, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices."

Fed Chairman Ben Bernanke made similar comments about the economy last month in remarks to the Joint Economic Committee of Congress. During that testimony, Bernanke also hinted that the Fed could soon pause to judge the impact of the Fed's previous interest rate hikes.

The Fed's next policy meeting is on June 28 and 29. According to rate futures on the Chicago Board of Trade, investors are pricing in a 38 percent chance of another quarter-point hike at that meeting.

Stocks, which traded lower just before the Fed announcement, bounced briefly but then reverted to modest losses. Bonds fell, pushing the yield on the 10-year U.S. Treasury up to 5.13 percent. Bond prices and yields move in opposite directions.

05-10-2006, 01:15 PM	Topic Starter
KingPriest2 Super Grover Join Date: Oct 2002 Location: KCMO Casino cash: $8635135	Fed raises rates again Fed raises rates again Central bank boosts key short-term rate to 5%, says further hikes 'may yet be needed' depending on economic reports. May 10, 2006: 2:40 PM EDT NEW YORK (CNNMoney.com) - The Federal Reserve raised its short-term interest rate target another quarter of a percentage point Wednesday - the 16th straight time that the central bank has raised rates. The Fed's policy-making committee added in its statement that it may need to keep raising rates but that the timing of the increases will depend on economic data. "Some further policy firming may yet be needed to address inflation risks but ... the extent and timing of any such firming will depend importantly on the evolution of the economic outlook as implied by incoming information," the Fed said in its statement. (To read the statement, click here.) The central bank's fed funds rate now stands at 5 percent, the highest since March 2001. Short-term rates were at historical lows when the Fed began its rate-hiking campaign in June 2004. The fed funds rate, an overnight bank lending rate, affects the rates consumers pay on credit cards, auto loans, home equity lines of credit and other types of debt. The Fed has been raising rates in a bid to keep inflation at bay. But despite concerns about rising energy prices, as well as signs that the economy is still healthy, there is a growing feeling among some economists and investors that the Fed risks hurting economic growth if it keeps boosting rates. In its statement, the Fed said that "economic growth has been quite strong so far this year" but that growth "was likely to moderate to a more sustainable pace, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices." Fed Chairman Ben Bernanke made similar comments about the economy last month in remarks to the Joint Economic Committee of Congress. During that testimony, Bernanke also hinted that the Fed could soon pause to judge the impact of the Fed's previous interest rate hikes. The Fed's next policy meeting is on June 28 and 29. According to rate futures on the Chicago Board of Trade, investors are pricing in a 38 percent chance of another quarter-point hike at that meeting. Stocks, which traded lower just before the Fed announcement, bounced briefly but then reverted to modest losses. Bonds fell, pushing the yield on the 10-year U.S. Treasury up to 5.13 percent. Bond prices and yields move in opposite directions.
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