Fed’s rate raises continue

Fed’s rate raises continue

The Federal Reserve boosted the overall lending rate by another quarter point to 3.25 percent, June 28. Back in September 2001, the Fed lowered the lending rate to one percent, a 46-year low. Since then, it has gradually raised the rate at a “measured pace” of nine consecutive one-quarter-percent hikes. The move is widely regarded as an effort to head off inflation before it siphons off progress made towards economic recovery and expansion. Thus far, the plan seems to be working. And the Fed has said that elevated expectations of longterm inflation remain contained. Indeed, after seeing modest jumps in March and April, consumer prices actually receded in May, the first such decline in 10 months. Most experts believe the overall aim of the Fed is to continue to raise rates throughout the remainder of 2005 until it reaches a neutral level such as 4.25 percent. At that point it would neither hamper nor help the economy.