Fed Rate Now 4.25%

The Federal Reserve raised the target for a key short-term interest rate late this morning by a quarter of a percentage point. The rate hike was widely expected by investors and economists as the economy continues to show signs of strength. Talk this may be the last raise, definitely this year.

The central bank also modified its closely-watched policy statement, a move that many analysts believe is a sign that the Fed may finally be nearing an end to its campaign of boosting interest rates.

The New York Times wrote, "Even with the slight language change, some analysts believe that the Fed will raise rates at least one more time by a quarter-point at Alan Greenspan's last meeting as Fed chairman on Jan. 31. "

The Fed has increased rates by a quarter of a point at its past thirteen meetings, dating back to June 2004. The federal funds now rate stands at 4.25 percent, its highest level since March 2001.

http://www.nytimes.com/2005/12/13/business/13wire-fed.html

--- OFFICIAL PRESS RELEASE

Press Release Date: December 13, 2005

For immediate release

The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 4-1/4 percent.

Despite elevated energy prices and hurricane-related disruptions, the expansion in economic activity appears solid. Core inflation has stayed relatively low in recent months and longer-term inflation expectations remain contained. 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. In any event, the Committee will respond to changes in economic prospects as needed to foster these objectives.

Voting for the FOMC monetary policy action were: Alan Greenspan, Chairman; Timothy F. Geithner, Vice Chairman; Susan S. Bies; Roger W. Ferguson, Jr.; Richard W. Fisher; Donald L. Kohn; Michael H. Moskow; Mark W. Olson; Anthony M. Santomero; and Gary H. Stern.

In a related action, the Board of Governors unanimously approved a 25-basis point increase in the discount rate to 5-1/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco.