Federal Reserve Board meeting, another interest rate hike.
For the fifth time since June, the Fed’s
Federal Open Market Committee raised the federal funds rate. Officials stuck to the steady-as-she-goes method of increases, inching it up 25 basis points, or one-quarter of a percentage point, to 6 percent. That’s the highest level in five years for the crucial rate lenders use to set rates on home equity lines of credit, auto loans and many other financial products.
Fed policy makers also increased the federal discount rate 25 basis points to 5.5 percent.
In commenting on the moves, the FOMC repeated a position originally laid out last month — that the economy needs to slow down in order to prevent inflation from accelerating. Real gross domestic product, the total output of America’s economy, rose at a 6.9 percent annual rate in the fourth quarter of 1999, up from a 5.7 percent annualized rate the quarter before. In the past, officials have said they’re more comfortable with a rate in the mid-3 percent range.
“Economic conditions and considerations addressed by the Committee are essentially the same as when the Committee met in February,” the group said in a
statement released after its meeting. “The Committee remains concerned that increases in demand will continue to exceed the growth in potential supply, which could foster inflationary imbalances that would undermine the economy’s record economic expansion”
Still, inflation has remained relatively tame outside of the energy sector. The core
Consumer Price Index, which excludes the impact of food and oil prices, rose just 2.1 percent in the 12-month period ended in February, below its average rate for the past several years. Unless the rate gathers steam, further hikes will likely continue to be gradual and may in fact cease by midyear.