MercoPress. South Atlantic News Agency

Fed raises rates to 4.5%, highest since April 2001

Arguing that possible increases in resource utilization as well as elevated energy prices have the potential to add inflation pressures the Federal Reserve Open Market Committee decided Tuesday to raise its target for the federal funds rate by 25 basis points to 4.5%.

This is the fourteenth time in a row that the Fed raised interest rates and was also the last meeting of retiring chairman Alan Greenspan. Rates have increased from 1% nineteen months ago and are now at their highest level since April 2001.

Equally interesting the Fed in its statement said that "some further policy firming may be needed" to keep price growth under control which could be hinting that borrowing costs may climb to 4.75% next March. However much of this will depend on Ben Bernanke who the Senate also on Tuesday approved as the Fed's new chairman.

The FOMC release states that "although recent economic data have been uneven, 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 policy firming may 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.; Jack Guynn; Donald L. Kohn; Jeffrey M. Lacker; Mark W. Olson; Sandra Pianalto; and Janet L. Yellen.