Federal Reserve raises interest rates again

Federal Reserve raises interest rates again

The US Federal Reserve raised a key short-term interest rate a quarter point to 3.75 points on Tuesday (September 20). It is the highest rate seen in four years when the Fed slashed rates shortly after the September 11 terrorist attacks. The raise surprised more than a few analysts who were expecting the Fed to pause on their series of rate hikes which is the eleventh in a row since June 2004. Most hoped the Fed would take a break to give the economy time to absorb and recover from the full impact of Hurricane Katrina. Concerns over creeping inflation, however, weighed heavily in the Fed’s decision saying that the economy will recover from Katrina but inflation is an even more pressing concern than it was before the disaster. Shortly after the announcement, the stock markets dropped despite Fed reassurances that Katrina’s effect would be short-lived.