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From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.
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And I'm Robert Siegel.
It was a unanimous vote at the Federal Reserve today. The Fed agreed to raise short-term interest rates by another quarter of a percentage point; that is the eighth quarter-point move in the past 10 months. The nation's central bank is trying to keep inflation in check, even as there are signs that the economy is cooling off. NPR's Jack Speer reports.
JACK SPEER reporting:
Today's move by the Federal Reserve takes the closely watched federal funds rate up to 3 percent; that's up 2 full percentage points from historic lows. Stuart Hoffman is chief economist at PNC Financial Services Group and also a former Federal Reserve Board economist. He says based on what Alan Greenspan and other Fed board members said today, there are probably more interest rate hikes to come.
Mr. STUART HOFFMAN (Chief Economist, PNC Financial Services Group): In terms of what the Fed said is they said that they still thought policy was accommodative, which is their way of saying they still think interest rates are probably a bit lower than they should be. But they did include, again, that any increases in interest rates in the future would be at a, quote, "measured pace," and that's the Fed's sort of code for saying, `We're going to raise rates again--more than likely--in June, but we're still not going to deviate from these quarter-of-a-percent increases at any one time.'
SPEER: Shortly after today's announcement, Wells Fargo, National City and a number of other banks immediately boosted their prime lending rates. That's the rate banks charge their best customers to borrow. Greg McBride is with Bankrate.com. He says increases in the prime rate ripple through the economy quickly.
Mr. GREG McBRIDE (Bankrate.com): Credit cards and home equity lines of credit are often pegged to the prime rate, and the prime rate has moved from 4 percent last summer to now 6 percent with the latest interest rate hike.
SPEER: In a statement, the Fed acknowledged the US economy has cooled. It said higher energy prices are starting to weigh on the economy, and as a result, pressures on inflation have picked up in recent months, though the Fed said longer-term inflation expectations remain well contained. But PNC economist Stuart Hoffman says the Fed still must strike a delicate balance.
Mr. HOFFMAN: I think what the Fed is saying is they worry about growth being too slow, and at the same time, they worry about inflation being too fast. And if they have to sort of choose between the two of them right now, they're still a bit more worried that inflation doesn't become a bigger problem.
SPEER: Today's Fed move will raise borrowing costs for many consumers, though one area seems to be so far largely immune to the string of interest rate hikes. Mortgage rates actually came down a bit last week and remain near their historic lows. Jack Speer, NPR News, Washington.
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