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Puck
The Texan
Joined: 05 Jan 2004
Posts: 5596
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 Tue Mar 22, 2005 2:32 pm Fed Raises Interest Rates by 1/4 Point |
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Fed Raises Interest Rates by 1/4 Point
Tuesday, March 22, 2005
As expected, the Federal Reserve Tuesday raised its bellwether federal funds rate (search) target by a quarter-percentage point to 2.75 percent from 2.50 percent, its seventh increase in a row.
The unanimous decision by Fed Chairman Alan Greenspan (search) and the Federal Open Market Committee (search) is part of a credit-tightening campaign to bring rates back up to more normal levels.
The Fed kept language that it has used with every rate increase, saying that future rate hikes would occur "at a pace that is likely to be measured," language seen as indicating continued quarter-point moves at the central bank's regular meetings.
Speculation that the Fed might drop its pledge to move rates at a "measured" pace was sparked last month when Greenspan, in congressional testimony, did not use the word "measured" to describe the Fed's future intentions.
A series of 13 rate reductions that began in January 2001 and ended in June 2003 left the funds rate at the 1 percent level, a 46-year low. During that period, the Fed battled to help an economy staggered by a series of blows from a plunging stock market and the 2001 recession to terrorist attacks and two wars.
The Fed's current rate-raising campaign began in June 2004 with a quarter-point boost, marking the first rate increase in four years. The Fed bumped up rates again by a quarter-point in August, September, November, December, February, and then once more on Tuesday.
The funds rate moves in lockstep with commercial banks' prime lending rate, which is used for many short-term consumer and business loans. The prime rate, now at 5.50 percent, would climb to 5.75 percent if the Fed pushes the funds rate up by one-quarter point Tuesday.
The Fed is lifting rates as energy prices are surging again. Oil prices, which set a new record high last week, briefly skyrocketed above $57 a barrel in trading Monday.
The economy, which grew at a solid 3.8 percent annual rate in the final quarter of 2004, is expected to do as well or better in the current quarter, analysts predict. But high energy prices may pose a risk to these projections as well as to the nation's gradually improving employment climate, they warn.
Employers added 262,000 jobs in February, the most since October. Economists are hopeful payrolls will post sizable gains in the coming months, but that may not occur if energy prices continue to surge, they said.
Reuters and the Associated Press contributed to this report.
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webtaz99
Commodore
Joined: 13 Nov 2003
Posts: 1229
Location: The Other Side
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| Tue Mar 22, 2005 3:39 pm |
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And we call it a "free" country; a "democracy"?    
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"History is made at night! Character is who you are in the dark." (Lord John Whorfin)
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Seven of Nine
Sammie's Mammy
Joined: 16 Jun 2001
Posts: 7871
Location: North East England
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| Tue Mar 22, 2005 4:02 pm |
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I see oil prices are already starting to affect the US economy...
I heard about the raising of interest rates last night/this morning. I still don't know if it's a good or bad thing 
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Republican_Man
STV's Premier Conservative
Joined: 26 Mar 2004
Posts: 14823
Location: Classified
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| Tue Mar 22, 2005 6:48 pm |
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I don't believe it's a good thing. Darn it.
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"Rights are only as good as the willingness of some to exercise responsibility for those rights- Fmr. Colorado Senate Pres. John Andrews
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webtaz99
Commodore
Joined: 13 Nov 2003
Posts: 1229
Location: The Other Side
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| Tue Mar 22, 2005 7:50 pm |
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This illustrates the Big Lie of "capitalism". The modern definition of "capitalism" now means "free market", but it's original meaning was "private ownership of the means of production". Unbridled "free markets" ALWAYS suffer wide swings in prosperity and prices, in a feast-or-famine type cycle. The Fed manipulates the interest rates in order to "smooth out the humps", making the idea of a "free market" a Big Lie.
-------signature-------
"History is made at night! Character is who you are in the dark." (Lord John Whorfin)
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