The Federal Open Market Committee, headed by Federal Reserve Chair Alan Greenspan, today raised its target for the federal funds rate by 25 basis points to 4.25 percent.
The widely expected move is the 13th time in a row the Federal Reserve has raised interest rates. The bank rate now at its highest level in four and a half years.
“Despite elevated energy prices and hurricane-related disruptions, the expansion in economic activity appears solid,” the Fed said in a statement. “Core inflation has stayed relatively low in recent months and longer-term inflation expectations remain contained.”
Framed in the always-cautious language of the Fed, the comments appear to suggest that the institution may be satisfied that its chief concern, containing inflation, is under control. This in turn suggests that the series of rate hikes might be coming to an end, a theory held by many industry observers.
The statement also seemed to be hinting that a few more rate increases were still in the works: “Nevertheless, possible increases in resource utilization as well as elevated energy prices have the potential to add to inflation pressures.
“The Committee judges that some further measured policy firming is likely to be needed to keep the risks to the attainment of both sustainable economic growth and price stability roughly in balance,” the statement said. “In any event, the Committee will respond to changes in economic prospects as needed to foster these objectives.”
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