Fed Raises Key Rate in U.S. for the 17th Consecutive Time, to 5.25%

Federal Reserve: www.federalreserve.gov

The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 5-1/4 percent.

Recent indicators suggest that economic growth is moderating from its quite strong pace earlier this year, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices, says Fed.

Readings on core inflation have been elevated in recent months. Ongoing productivity gains have held down the rise in unit labor costs, and inflation expectations remain contained. However, the high levels of resource utilization and of the prices of energy and other commodities have the potential to sustain inflation pressures. The Committee judges that some inflation risks remain.

Commercial banks were expected to quickly follow the Fed announcement by raisng their benchmark prime rate by a quarter-point to a five-year high of 8.25 percent.

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