MercoPress. South Atlantic News Agency

Fed raises interest rates 25 points to 4.75%

The United States Federal Reserve meeting for the first time under Chairman Ben Bernanke raised interest rates for the fifteenth time by 25 points to 4.75%.

Rates have increased from 1% over the past 20 months and are now at their highest level since April 2001. In its report the Federal Open Market Committee said that economic growth had "rebounded strongly", but left the door open for further increases since the "elevated prices of energy and other commodities have the potential to add to inflation pressures". Market analysts expect the Federal Reserve to raise rates at least once again in the coming months to 5%.

US consumer confidence reached its highest level last month in four years, according to an update from the Conference Board, the business information group.

The assessment of current conditions was the strongest since 2001.Consumers also upgraded their assessment of the outlook.

Today's announcement helped boost the US dollar in money markets.

The FOMC release follows:

"The slowing of the growth of real GDP in the fourth quarter of 2005 seems largely to have reflected temporary or special factors. Economic growth has rebounded strongly in the current quarter but appears likely to moderate to a more sustainable pace. As yet, the run-up in the prices of energy and other commodities appears to have had only a modest effect on core inflation, ongoing productivity gains have helped to hold the growth of unit labor costs in check, and inflation expectations remain contained. Still, possible increases in resource utilization, in combination with the elevated prices of energy and other commodities, 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: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Susan S. Bies; Jack Guynn; Donald L. Kohn; Randall S. Kroszner; Jeffrey M. Lacker; Mark W. Olson; Sandra Pianalto; Kevin M. Warsh; and Janet L. Yellen."In a related action, the Board of Governors approved a 25-basis-point increase in the discount rate to 5-3/4 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, Dallas, and San Francisco".

The FOMC meets again May 10.