The Fed Raised Interest Rate by 25 Basis For the 16th Consecutive Time to 5%

The Federal Reserve today raised the key interest rate to the highest level in more than five years and said that the economic growth has been quite strong so far this year.

The Fed's rate hikes will increase the general borrowing costs including adjustable rate home mortgages and auto loans. Banks will also match the Fed action by raising the the prime lending rate to a five-year high of 8%.

Federal Reserve:


Highlights from Fed Comments

Growth is likely to moderate to a more sustainable pace, reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices.
As yet, the run-up in the prices of energy and other commodities appears to have had only a modest effect on core inflation.
Productivity gains have helped to hold the growth of unit labor costs in check, and inflation expectations remain contained.
Higher prices of energy and other commodities have the potential to add to inflation pressures.
Some further policy firming may yet be needed to address inflation risks. 
The extent and timing of further firming will depend on the evolution of the economic outlook as implied by incoming information
US economy grew at a pace of 4.8% in the first quarter of 2006, the fastest GDP growth in 2 1/2 years.


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